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Nigeria’s banking sector recorded a rise in non-performing loans in 2025 following the Central Bank of Nigeria’s withdrawal of regulatory forbearance granted during the COVID-19 pandemic, according to the apex bank’s latest macroeconomic outlook report.
The report showed that the industry’s non-performing loans (NPL) ratio increased to an estimated seven per cent, exceeding the prudential benchmark of five per cent. The CBN attributed the uptick to the exit from temporary relief measures that had allowed banks to restructure pandemic-affected loans without immediately classifying them as non-performing.
“The non-performing loans ratio stood at an estimated 7.00 per cent relative to the prudential limit of 5.00 per cent. The level of NPLs reflected the withdrawal of the regulatory forbearance granted to banks during the COVID-19 pandemic,” the report stated.
Regulatory forbearance had enabled lenders to absorb shocks from the pandemic by restructuring distressed facilities. With the withdrawal of the measure, several previously restructured loans have now crystallised as bad debts, pushing the industry ratio above the regulatory ceiling.
Despite the rise in NPLs, the CBN said the banking system remained broadly stable in 2025, supported by strong capital and liquidity buffers. Industry liquidity 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.
According to the apex bank, these indicators suggest that banks retain sufficient capacity to absorb shocks. It linked the sector’s resilience to robust interest income, digital transformation initiatives, and the ongoing banking recapitalisation programme.
The recapitalisation exercise, which raises minimum capital requirements across the sector, is expected to strengthen balance sheets and improve banks’ capacity to support the real economy through larger and longer-term lending. The CBN added that the programme, alongside macro-prudential guidelines and tighter oversight, helped sustain market confidence during the year.
The report also noted that the capital market remained buoyant, reflecting renewed investor interest in financial stocks. However, it cautioned that rising NPLs signal emerging vulnerabilities, particularly as high interest rates and challenging macroeconomic conditions strain borrowers’ repayment capacity.
The CBN warned that a “significant rise in non-performing loans could impair asset quality and weaken banks’ balance sheets, thereby posing systemic risk,” underscoring the need for sustained prudential discipline and close monitoring of credit risk.
To improve loan recovery and strengthen credit discipline, the apex bank recommended deeper operational integration of the Global Standing Instruction (GSI) framework across all financial institutions. It said improved repayment performance would support MSME and retail lending, reduce operational losses, and help banks build stronger capital buffers.
The report also noted that monetary conditions remained tight for most of 2025, as the CBN prioritised price and exchange rate stability. The Monetary Policy Rate, which was raised aggressively in 2024, was only marginally eased in September 2025 after signs of improving macroeconomic and price stability.
Looking ahead, the CBN said the outlook for the banking sector remains positive, but cautioned that lenders must continue to strengthen risk management practices, diversify loan portfolios, and maintain strong capital positions to withstand future shocks. It added that banking recapitalisation, alongside reforms in the foreign exchange market and tax administration, forms part of broader efforts to consolidate macroeconomic stability and boost investor confidence in 2026.
Earlier, in a June 2025 circular signed by its Director of Banking Supervision, Olubukola Akinwunmi, the CBN directed banks benefiting from regulatory forbearance to suspend dividend payments, defer executive bonuses, and halt investments in foreign subsidiaries or new offshore ventures until their forbearance positions are fully exited and independently verified.
The CBN said the measures were aimed at strengthening capital buffers, enhancing balance-sheet resilience, and promoting prudent capital retention during the transition period.
Supporting the move, Renaissance Capital said in a report that several banks still have significant forbearance exposures. Based on its estimates, Zenith Bank, First Bank, and Access Bank have forbearance exposures of 23 per cent, 14 per cent, and four per cent of their gross loan books, respectively. Fidelity Bank and FCMB were estimated to have exposures of 10 per cent and eight per cent, while Stanbic IBTC and GTCO were reported to have zero forbearance exposure.
In absolute terms, Renaissance Capital estimated forbearance exposures at $304m for AccessCorp, $887m for FirstHoldCo, $134m for FCMB Group, $296m for Fidelity Bank, $282m for UBA, and $1.6bn for Zenith Bank. The firm noted that some lenders could breach single obligor limits depending on how the exposures crystallise.
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