Concerns as Nigerian banks see increase in bad loans after CBN ends forbearance

Nigeria’s banking industry recorded a rise in non-performing loans in 2025 following the Central Bank of Nigeria’s decision to withdraw regulatory forbearance introduced during the COVID-19 pandemic.

This is according to the apex bank’s latest macroeconomic outlook released on Wednesday, January 31, 2025.

Data from the report indicate that the sector’s non-performing loans (NPL) ratio increased to about seven percent, surpassing the prudential limit of five percent.

The CBN attributed the increase to the expiration of temporary relief measures that had allowed banks to restructure pandemic-affected loans without immediately classifying them as bad.

“The non-performing loans ratio stood at an estimated 7.00 percent relative to the prudential limit of 5.00 percent. The level of NPLs reflected the withdrawal of the regulatory forbearance granted to banks during the COVID-19 pandemic,” the report read.

Recall that during the pandemic, lenders were permitted to reschedule stressed facilities to ease pressure on borrowers.

However, in June 2025, the CBN issued a circular directing banks operating under forbearance to suspend dividend payments, defer executive bonuses, and halt investments in foreign subsidiaries and offshore ventures.

With the withdrawal of the regulatory relief, several previously restructured loans have now been reclassified as non-performing, pushing the industry’s NPL ratio above the regulatory threshold.

Despite the rise in bad loans, the CBN noted that Nigeria’s financial system remained broadly stable in 2025.

The banking sector continued to post strong liquidity and capital positions, with the average liquidity ratio at about 65 percent, well above the 30 percent minimum, while the capital adequacy ratio stood at 11.6 percent, exceeding the 10 percent requirement.

The apex bank warned that a sustained increase in non-performing loans could weaken asset quality and banks’ balance sheets, posing potential systemic risks.

It stressed the need for close monitoring of credit risk and the maintenance of prudential discipline.

The CBN also advised stronger operational integration of the Global Standing Instruction framework across financial institutions to improve loan recovery and reinforce credit discipline.

Reacting to Nigerian banks’ forbearance exposures, Renaissance Capital expressed support for the CBN’s decision, noting that some major banks still have notable exposures.

Based on Renaissance Capital estimates, Zenith Bank, First Bank, and Access Bank account for about 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.

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

Zenith Bank had previously indicated plans to fully write off its forbearance exposures by the end of the second quarter of last year.

Concerns as Nigerian banks see increase in bad loans after CBN ends forbearance