FirstBank Breaches Capital Compliance Amidst Heavy Oil, Gas Lending
First Bank of Nigeria Limited’s capital adequacy ratio (CAR) fell below the Central Bank of Nigeria (CBN) benchmark in Q1 2026, a regulatory breach that analysts anticipate will be restored at the end of the third quarter.
In their separate ratings notes, Fitch and Moody’s anticipate that capital compliance will be met by the end of the third quarter of the financial year 2026, based on the group’s plan to raise additional funds from the market.
The financial services company is facing intense pressure due to lower earnings performance, weak asset quality, and a breach of the regulator’s capital compliance requirements.
Pressures mounted as First Bank’s appetite for oil and gas lending increased over the years, reaching 35% of the net loan portfolios in financial year 2025.
Ratings analysts noted that the exposure was higher than that of its peers in the industry.
The size of exposure to a single industry led to heavy loan migration into stage 3 and a spike in provisioning, which damaged the group’s profitability last year.
The capital adequacy ratios of the bank and the group declined to levels below the 15% regulatory minimum in 2025, with the group reporting a ratio of 10.95%, Moody’s said in a note.
The deterioration was primarily driven by sizeable provisioning requirements following the exit from regulatory forbearance, which resulted in an increase in the problem loan ratio to 12.2% as of December 2025.
In Q1, First Bank’s capital adequacy ratio improved slightly to 13%, though this is expected to constrain the financial institution’s lending capacity.
The retail bank, which serves 42 million customers, funded massive oil and gas operations across the upstream and downstream amid global oil price fluctuations.
Analysts anticipate a boost in earnings from the recovery of oil and gas clients, driven by a significant increase in oil prices since February 2026 following the US-Iran war.
A review of its loan books showed that First Bank is heavily exposed to oil and gas, which peaked at 35% of net loans, with funding primarily from deposit collection from its large retail customer base.
The group’s total loans across sectors printed above N8.74 trillion in 2025. From the total corporate loan portfolio, N3.194 trillion was related to oil and gas sector funding. Meanwhile, no other sectors attracted up to N1 trillion in loans, with thin retail lending size.
First Bank’s appetite for oil risk outweighed its interest in manufacturing, retail, telecommunications, transportation, consumer credit, agriculture, real estate, or construction, among others.
Despite taking higher risk with retail deposits, the bank has continued to underperform most of its immediate peers in the Tier-1 group.
In 2025, the group reported a sharp drop in profitability, and analysts have not been entirely bullish on industry performance in 2026 due to increased regulations.
Its audited report revealed that its non-operating holding company profit reduced to N147.254 billion from N663.49 billion in the equivalent period in 2024.
The withdrawal of regulatory forbearance in 2025 pushed a number of clients’ loans into stage 3, reflecting a low probability of recovery.
FBN’s consolidated total capital adequacy ratio fell below the 15% minimum regulatory requirement at the end of 2025 but improved to 13% in Q1 2026.
Ratings analysts anticipate capital compliance will be restored by the end of Q3 2026, as the holding company plans to raise N253 billion in paid-in capital, supported by stronger internal capital generation. Naira Trades Sideways as Market Digests CBN FX Manual
