Nigerian Banks Face Troubles as Bad Loans Surge Following CBN Forbearance End

Table of Contents

• Increase in Non-Performing Loans
• CBN's Report Overview
• Expiration of Forbearance Measures
• Stability of the Financial System
• Need for Operational Integration
• Renaissance Capital's Reaction

Nigeria’s banking sector experienced an increase in non-performing loans in 2025 following the Central Bank of Nigeria’s decision to end the regulatory forbearance that was implemented during the COVID-19 pandemic.

This information comes from the apex bank’s latest macroeconomic outlook published on Wednesday, January 31, 2025.

According to data from the report, the sector’s non-performing loans (NPL) ratio rose to approximately seven percent, exceeding the prudential limit of five percent.

The CBN attributed this rise to the conclusion of temporary relief measures that had permitted banks to restructure loans impacted by the pandemic without immediately categorizing them as non-performing.

“The non-performing loans ratio was estimated at 7.00 percent compared to the prudential limit of 5.00 percent. The increase in NPLs reflects the withdrawal of the regulatory forbearance provided to banks during the COVID-19 pandemic,” stated the report.

It is important to remember that during the pandemic, lenders were allowed to reschedule distressed loans to alleviate the burden on borrowers.

However, in June 2025, the CBN issued a circular instructing banks under forbearance to suspend dividend payments, postpone executive bonuses, and cease investments in foreign subsidiaries and offshore projects.

With the retraction of regulatory relief, many previously restructured loans have now been reclassified as non-performing, resulting in the industry’s NPL ratio exceeding the regulatory limit.

Despite the increase in bad loans, the CBN remarked that Nigeria’s financial system remained largely stable in 2025.

The banking sector continued to show strong liquidity and capital positions, with the average liquidity ratio at around 65 percent, significantly above the 30 percent minimum, while the capital adequacy ratio was at 11.6 percent, surpassing the 10 percent requirement.

The apex bank cautioned that a sustained rise in non-performing loans could undermine asset quality and banks’ balance sheets, creating potential systemic risks.

It emphasized the necessity for close monitoring of credit risk and maintaining prudential discipline.

The CBN also recommended a stronger operational integration of the Global Standing Instruction framework across financial institutions to enhance loan recovery and strengthen credit discipline.

In response to the forbearance exposures of Nigerian banks, Renaissance Capital expressed support for the CBN’s decision, highlighting that some major banks still have significant exposures.

According to estimates from Renaissance Capital, Zenith Bank, First Bank, and Access Bank represent approximately 23 percent, 14 percent, and four percent of their gross loan books under forbearance, respectively. Fidelity Bank and FCMB were estimated to have exposures of around 10 percent and eight percent.

Conversely, Stanbic IBTC and GTCO were assessed to have no forbearance exposure in their gross loan portfolios.

Zenith Bank had previously announced plans to completely write off its forbearance exposures by the end of the second quarter of the previous year.

Eze Chidiebere Paul

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