January 02, (THEWILL) — Nigeria’s banking sector has recorded a notable rise in non-performing loans (NPLs, with the industry-wide ratio climbing to about 7 percent in 2025, above the 5 percent prudential limit, following the Central Bank of Nigeria’s (CBN) decision to end regulatory forbearance measures introduced during the COVID-19 pandemic.
The increase reflects the expiration of temporary reliefs that had allowed banks to restructure distressed loans without classifying them as non-performing. With the suspension of these measures, several loans that were previously rescheduled under the forbearance framework have now crystallised as impaired credits, pushing the sector’s bad loan ratio higher.
Despite the breach of the regulatory threshold, the CBN maintains that the banking system remains broadly stable. Industry data show that banks continue to operate with strong buffers, with an average liquidity ratio of about 65 percent, well above the 30 per cent minimum, while the capital adequacy ratio stands at approximately 11.6 percent, exceeding the 10 percent regulatory requirement. According to the apex bank, these indicators suggest that lenders still have sufficient capacity to absorb shocks and sustain operations.
However, the CBN has cautioned that a prolonged rise in non-performing loans could weaken profitability, constrain lending capacity, and heighten credit risk, especially in an environment of elevated interest rates and tighter economic conditions. To strengthen loan recovery and reinforce repayment discipline, the regulator has renewed its push for wider adoption of the Global Standing Instruction framework.
While analysts view the spike in NPLs as a short-term adjustment to more transparent asset quality reporting, they agree that stronger risk management, ongoing recapitalisation efforts, and sustained regulatory oversight will be critical to preserving financial stability and supporting economic growth.
Ogochukwu Onwaeze
