Nigeria’s banking sector saw a marked increase in bad loans in 2025 after the Central Bank of Nigeria (CBN) withdrew regulatory forbearance measures that had been in place since the COVID-19 pandemic, according to the apex bank’s latest Macroeconomic Outlook report. Nairametrics
The report showed that the industry’s non-performing loans (NPL) ratio climbed to an estimated 7 per cent, surpassing the regulatory prudential benchmark of 5 per cent. The increase reflects the crystallisation of previously restructured loans that no longer qualified for special treatment once forbearance ended. Businessday NG+1
Regulatory forbearance had allowed banks to restructure pandemic-impacted credit facilities without classifying them as non-performing, masking some stress in loan portfolios. With those relief measures now withdrawn, a larger share of restructured exposures migrated into bad-loan status, breaching the regulatory ceiling. Nairametrics
Despite this uptick in impaired assets, the CBN emphasised that the banking system remained broadly stable in 2025, supported by healthy liquidity and capital buffers. Data from the report show the average liquidity ratio at approximately 65 per cent — more than double the minimum requirement — while the banking industry’s capital adequacy ratio (CAR) stayed comfortably above the 10 per cent regulatory threshold at around 11.6 per cent. Nairametrics+1
The apex bank attributed this resilience partly to strong interest income, continued digital transformation in financial services, and an ongoing bank recapitalisation drive aimed at deepening balance sheet strength and expanding lending capacity. The recapitalisation effort has seen substantial capital injections by domestic investors, with banks racing to meet heightened minimum capital requirements by the compliance deadline. Nairametrics
The CBN also highlighted tighter regulatory oversight and macro-prudential measures, including directives such as suspending dividend payments, deferring executive bonuses, and restricting offshore investments by certain banks until their capital adequacy and provisioning levels are fully verified. Such measures are designed to reinforce sector stability and prudent capital retention. Nairametrics
However, the regulator cautioned that a sustained rise in non-performing loans could weaken asset quality and pose systemic risks, especially amid higher interest rates and economic pressures that strain borrowers’ repayment capacities. To mitigate these risks, the bank has recommended deeper integration of the Global Standing Instruction (GSI) framework across the financial system to support loan recovery and strengthen credit discipline. Nairametrics
Monetary conditions in 2025 remained relatively tight, with the Monetary Policy Rate kept high for most of the year before a modest easing in September as inflationary pressures showed signs of moderation. These policy stances aim to balance price and exchange rate stability with overall financial system health. Nairametrics
Looking ahead, the CBN projects a positive outlook for the banking sector but urged lenders to enhance risk management practices, diversify loan portfolios, and maintain robust capital positions to guard against future shocks. Ongoing reforms in foreign exchange markets, tax administration, and financial infrastructure are also expected to bolster macroeconomic stability and investor confidence into 2026. Nairametrics
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