Nigeria’s banking sector has experienced a rise in non‑performing loans (NPLs) after the Central Bank of Nigeria (CBN) withdrew the regulatory forbearance introduced during the COVID‑19 pandemic. In its latest macro‑economic outlook, released on 31 January 2025, the CBN reported that the sector’s NPL ratio had climbed to roughly 7 percent, surpassing the prudential limit of 5 percent. The increase was attributed to the expiration of temporary relief measures that had allowed banks to restructure pandemic‑affected loans without immediately classifying them as bad. The report noted, “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 CBN issued a circular directing banks operating under forbearance to suspend dividend payments, defer executive bonuses, and halt investments in foreign subsidiaries and offshore ventures. Consequently, 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 CBN 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 percent—well above the 30 percent minimum—and the capital adequacy ratio at 11.6 percent, exceeding the 10 percent requirement. The CBN warned that a sustained increase in NPLs could weaken asset quality and banks’ balance sheets, posing potential systemic risks. It stressed the need for close monitoring of credit risk, maintenance of prudential discipline, and stronger operational integration of the Global Standing Instruction framework across financial institutions to improve loan recovery and reinforce credit discipline.
Renaissance Capital supported the CBN’s decision, noting that some major banks still have notable exposures. According to its estimates, Zenith Bank, First Bank, and Access Bank account for about 23 percent, 14 percent, and 4 percent of their gross loan books under forbearance, respectively, while Stanbic IBTC and GTCO were assessed to have no forbearance exposure in their gross loan portfolios. This development highlights the need for Nigerian banks to strengthen risk‑management and provisioning practices to mitigate the impact of non‑performing loans on their balance sheets.
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