RismadarVoice Reporters, June 1, 2026
Nigeria’s banking sector recorded a rise in bad loans to 8.03 per cent in January 2026, about seven months after the Central Bank of Nigeria (CBN) discontinued regulatory forbearance granted to lenders on certain credit exposures and single obligor limit breaches.
Figures contained in the CBN’s January 2026 Economic Report showed that the industry’s non-performing loans (NPL) ratio increased by 0.52 percentage points from 7.51 per cent in December 2025.
Despite the increase, the ratio remains significantly above the CBN’s prudential benchmark of five per cent, indicating continued pressure on asset quality across the banking system even as regulators maintain that the sector is broadly stable.
The report stated: “Following the bank’s loan reclassification after the withdrawal of forbearance, the non-performing loans ratio rose by 0.52 percentage point to 8.03 per cent compared with the level in the preceding period and was above the 5.00 per cent prudential threshold.”
The development follows the CBN’s June 2025 directive instructing banks still benefiting from regulatory forbearance on credit exposures and single obligor limit waivers to suspend dividend payments, defer executive bonuses, and halt new investments in foreign subsidiaries and offshore ventures.
According to the regulator, the policy was designed to strengthen capital buffers, improve balance sheet resilience, and ensure banks retain earnings while transitioning out of temporary relief measures.
The apex bank also fully terminated COVID-19-related forbearance and waivers on single obligor limits effective June 30, 2025, requiring banks to align all affected credit exposures with existing prudential standards.
Under the earlier forbearance regime, banks were allowed to restructure pandemic-hit loans without immediately classifying them as non-performing. However, the withdrawal of that flexibility has led to the reclassification of several restructured facilities as bad loans, pushing up the industry’s NPL ratio.
Analysts say the development reflects a broader clean-up of bank balance sheets, as previously concealed credit weaknesses are now being fully recognised in financial statements.
In its macroeconomic outlook, the CBN warned that a sharp increase in non-performing loans could weaken bank balance sheets and pose systemic risks to financial stability, stressing the need for stronger risk management practices across the sector.
The regulator also advocated deeper adoption of the Global Standing Instruction (GSI) framework to improve loan recovery and enforce credit discipline across financial institutions.
Earlier, in February 2025, the CBN directed that bank directors with non-performing insider-related loans should immediately step down, as part of efforts to strengthen corporate governance and risk control in the sector. It also ordered recovery of such loans through collateral enforcement, including seizure of shareholdings where necessary.
More recently, the apex bank restricted additional credit access for large borrowers with non-performing loans recorded in the Credit Risk Management System or licensed credit bureaus, as part of measures to curb systemic risk.
Under the directive, such obligors are no longer eligible for new loans or contingent credit facilities, including guarantees, letters of credit, and performance bonds.
Despite the rise in bad loans, the CBN maintained that the banking industry remains resilient. Liquidity improved to 63.38 per cent in January from 57.22 per cent in December, while the capital adequacy ratio stood at 12.05 per cent, above the regulatory minimum of 10 per cent.
The figures present a mixed outlook for the sector strong liquidity and adequate capital buffers on one hand, but rising asset quality concerns on the other, driven by legacy exposures, macroeconomic pressures, and tighter regulatory classification.
The CBN and members of its Monetary Policy Committee have warned that rising non-performing loans could undermine monetary policy effectiveness and threaten financial stability if not addressed.
