Eight Nigerian banks posted a total of N156bn in impairment charges on credit and financial assets during Q1 2025, reflecting the pressure of Nigeria’s volatile economic landscape. Despite a slight 5.2% year-on-year drop from N164.53bn in Q1 2024, individual bank performances varied significantly. Zenith Bank led the pack with N49.38bn in provisions, though this was down 11.8% from the previous year. These charges—also known as loan losses, highlight the cost of lending in an environment defined by inflation, naira depreciation, and weak liquidity among businesses and consumers.
Zenith, Access, and First HoldCo all reported declines in impairments, indicating stronger asset quality and better credit recovery efforts. In contrast, UBA, Fidelity, and Wema saw sharp increases in provisions, pointing to rising credit risks and expanding loan exposures. GTCO kept its loan impairments stable, but suffered a significant 43.6% drop in profit. Meanwhile, FCMB reported the largest year-on-year drop in impairment charges—59.9%—driven largely by strong recoveries on written-off loans.
Experts like Charles Sanni of Cowry Treasurers Limited believe that banks’ varying approaches to impairment charges reflect their risk appetites and internal credit monitoring systems. He noted that some banks have adopted an aggressive “bite the bullet” approach by swiftly writing off bad loans. Others continue to expand cautiously, adjusting portfolios based on sector-specific vulnerabilities, especially in high-interest environments. The most proactive lenders, he said, are those focusing on borrowers’ leverage and sectoral sensitivity.
Ultimately, the first quarter of 2025 underscores how macroeconomic conditions are shaping financial sector dynamics in Nigeria. With rising interest rates and inflation fueling demand for credit—particularly in manufacturing and oil & gas—banks are treading a fine line between growth and risk. While overall impairment charges dipped slightly, their uneven distribution among banks reflects diverse strategies in loan management and risk tolerance.
Source: Punch