ABUJA: Nigeria’s banking sector recorded a spike in non-performing loans (NPLs) in 2025 following the Central Bank of Nigeria’s (CBN) withdrawal of regulatory forbearance introduced during the COVID-19 pandemic.
According to the CBN’s latest Macroeconomic Outlook Report, the industry’s NPL ratio rose to an estimated 7 per cent, exceeding the prudential threshold of 5 per cent, as previously restructured loans were reclassified as bad debts after temporary relief measures expired.
Despite the increase, the apex bank said the financial system remained broadly stable, supported by strong liquidity and capital buffers.
The sector’s liquidity ratio averaged 65 per cent, far above the 30 per cent minimum, while the capital adequacy ratio stood at 11.6 per cent, exceeding the regulatory benchmark of 10 per cent.
The CBN attributed the sector’s resilience to robust interest income, digital banking expansion, and the ongoing bank recapitalisation programme, which is expected to strengthen balance sheets and improve banks’ capacity to fund the real economy.
However, the bank warned that a sustained rise in bad loans could weaken asset quality and pose systemic risks, particularly amid high interest rates and difficult economic conditions affecting borrowers’ repayment capacity.
To curb rising NPLs, the CBN urged deeper integration of the Global Standing Instruction (GSI) framework across financial institutions to enhance loan recovery, improve credit discipline, and boost MSME and retail loan performance.
In June 2025, the CBN also directed banks still operating under regulatory forbearance to suspend dividend payments, defer executive bonuses, and halt foreign investments until their capital adequacy and provisioning levels are fully compliant.
Investment firm Renaissance Capital estimated that some major banks still carry significant forbearance exposures, raising concerns that a few lenders could breach Single Obligor Limits, although institutions such as GTCO and Stanbic IBTC were reported to have zero exposure.
Looking ahead, the CBN said the banking sector’s outlook remains positive but stressed the need for stronger risk management, diversified loan portfolios, and sustained capital strengthening to safeguard financial stability in 2026.
