Nigeria’s banking sector has seen a rise in non-performing loans, following the Central Bank of Nigeria’s decision to withdraw regulatory forbearance introduced during the COVID-19 pandemic. According to the bank’s latest macroeconomic outlook, released on January 31, 2025, the sector’s non-performing loans ratio increased to approximately 7%, exceeding the prudential limit of 5%.
The Central Bank of Nigeria attributed the increase to the expiration of temporary relief measures that allowed banks to restructure pandemic-affected loans without immediately classifying them as bad. The report stated that “the non-performing loans ratio stood at an estimated 7.00 percent relative to the prudential limit of 5.00 percent. The level of NPLs reflected the withdrawal of the regulatory forbearance granted to banks during the COVID-19 pandemic.”
During the pandemic, lenders were permitted to reschedule stressed facilities to ease pressure on borrowers. However, in June 2025, the Central Bank of Nigeria issued a circular directing banks operating under forbearance to suspend dividend payments, defer executive bonuses, and halt investments in foreign subsidiaries and offshore ventures. As a result, several previously restructured loans have now been reclassified as non-performing, pushing the industry’s NPL ratio above the regulatory threshold.
Despite the rise in bad loans, the Central Bank of Nigeria noted that Nigeria’s financial system remained broadly stable in 2025. The banking sector continued to post strong liquidity and capital positions, with the average liquidity ratio at about 65%, well above the 30% minimum, while the capital adequacy ratio stood at 11.6%, exceeding the 10% requirement.
The Central Bank of Nigeria warned that a sustained increase in non-performing loans could weaken asset quality and banks’ balance sheets, posing potential systemic risks. It stressed the need for close monitoring of credit risk and the maintenance of prudential discipline. The bank also advised stronger operational integration of the Global Standing Instruction framework across financial institutions to improve loan recovery and reinforce credit discipline.
Renaissance Capital expressed support for the Central Bank of Nigeria’s decision, noting that some major banks still have notable exposures. According to Renaissance Capital estimates, Zenith Bank, First Bank, and Access Bank account for about 23%, 14%, and 4% of their gross loan books under forbearance, respectively. In contrast, Stanbic IBTC and GTCO were assessed to have no forbearance exposure in their gross loan portfolios. The development highlights the need for Nigerian banks to strengthen their risk management and provisioning practices to mitigate the impact of non-performing loans on their balance sheets.