Nigeria’s banking sector recorded a rise in bad loans in 2025 after the Central Bank of Nigeria withdrew the regulatory forbearance granted to lenders during the COVID-19 pandemic, according to the apex bank’s latest macroeconomic outlook report.
The report showed that the banking industry’s Non-Performing Loans ratio climbed to an estimated seven per cent, exceeding the prudential benchmark of five per cent. The CBN said the increase reflected the impact of ending the temporary reliefs earlier granted to banks to cushion the effect of the pandemic on borrowers.
“The Non-performing Loans ratio stood at an estimated 7.00 per cent relative to the prudential limit of 5.00 per cent. The level of NPLs reflected the withdrawal of the regulatory forbearance granted to banks during the COVID-19 pandemic,” the report read.
Regulatory forbearance had allowed banks to restructure loans affected by the pandemic without immediately classifying them as non-performing. With the withdrawal of the measure, a number of previously restructured facilities have now crystallised as bad loans, pushing the industry ratio above the regulatory ceiling.
Despite the increase in bad loans, the CBN stressed that the financial system remained broadly stable in 2025, supported by stronger capital buffers and liquidity positions across the banking sector. The industry liquidity ratio averaged 65 per cent, well above the 30 per cent minimum requirement, while the capital adequacy ratio stood at 11.6 per cent, also above the 10 per cent threshold.
According to the bank, these indicators showed that Nigerian lenders retain the capacity to absorb shocks. The apex bank linked the sector’s resilience to strong interest income, ongoing digital transformation, and the ongoing recapitalisation programme.
The recapitalisation policy, which significantly raises minimum capital requirements for Nigerian banks, is expected to strengthen balance sheets and enhance banks’ ability to support the real sector through bigger-ticket lending.