Nigeria’s banking sector experienced a notable rise in bad loans in 2025 following the Central Bank of Nigeria’s (CBN) withdrawal of the regulatory forbearance measures that were granted during the COVID-19 pandemic, according to the apex bank’s latest macroeconomic outlook report.....KINDLY READ THE FULL STORY HERE▶

The report indicated that the industry’s Non-Performing Loans (NPL) ratio increased to an estimated seven per cent, surpassing the prudential benchmark of five per cent. The CBN attributed the rise to the expiration of temporary relief measures that had allowed banks to restructure loans affected by the pandemic without immediately classifying them as non-performing.

Despite the increase in NPLs, the report confirmed that Nigeria’s financial system remained broadly stable, supported by robust capital buffers and liquidity levels. The banking sector’s liquidity ratio averaged 65 per cent, well above the 30 per cent minimum, while the capital adequacy ratio stood at 11.6 per cent, exceeding the 10 per cent threshold. The CBN noted that Nigerian banks retain the capacity to absorb shocks, aided by strong interest income, ongoing digital transformation, and a recapitalisation programme aimed at strengthening balance sheets and expanding lending capacity.

The apex bank highlighted that, while the recapitalisation exercise, combined with enhanced regulatory oversight, maintained market confidence, the surge in NPLs underscores emerging vulnerabilities. Higher interest rates and challenging economic conditions have affected some borrowers’ repayment ability, potentially posing systemic risks if unchecked.

To mitigate risks, the CBN recommended deepening the operational integration of the Global Standing Instruction (GSI) framework to improve loan recovery efficiency and credit discipline. Strengthened repayment mechanisms, the bank said, would enhance MSME and retail credit performance, reduce operational losses, and bolster capital buffers.

Monetary conditions remained tight for most of 2025, with the Monetary Policy Rate only slightly eased in September after signs of price and exchange rate stability. The CBN reiterated its commitment to financial stability through continued supervision, macro-prudential tools, and enforcement of loan recovery measures.

In 2025, banks operating under the previous regulatory forbearance were directed to suspend dividend payments, defer executive bonuses, and halt investments in foreign subsidiaries until capital adequacy and provisioning levels were verified as compliant with standards.

Analysts from Renaissance Capital estimated that top-tier banks such as Zenith Bank, First Bank, and Access Bank had forbearance exposures of 23 per cent, 14 per cent, and four per cent of their gross loan books, respectively. Other banks, including Fidelity Bank and FCMB, had exposures of 10 per cent and eight per cent. Certain lenders’ exposures, particularly FirstHoldCo, Fidelity Bank, and Zenith Bank, raised concerns about potential breaches of Single Obligor Limits.

The CBN’s report concludes that while the sector’s fundamentals remain strong, banks must continue improving risk management, diversifying loan portfolios, and maintaining robust capital positions to navigate future shocks.

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