11 Nigerian Banks Breach Non-Performing Loan Limit Amid Credit Quality Concerns

Rising NPLs Spark Concern in Nigeria’s Banking Sector
At least eleven commercial banks in Nigeria exceeded the regulatory threshold for non-performing loans (NPLs) in April 2025, according to Mustapha Akinkunmi, a member of the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC). Akinkunmi revealed in his personal statement following the 300th MPC meeting that the NPL ratio had climbed to 5.62%, surpassing the CBN’s prudential benchmark of 5%. The increase was attributed mainly to loan reclassifications conducted during annual risk assessments.

Sharp Rise Compared to Previous Year
This marks a significant deterioration compared to the previous year when only six banks were in breach. Although Akinkunmi did not identify the banks involved, the development raises red flags about emerging credit risks in the banking sector. He warned that without intervention, especially in vulnerable sectors like oil and gas, systemic risks could arise. The MPC member hinted that the CBN may consider temporary forbearance measures to contain the fallout.

Capital Buffers Improve Through Recapitalisation
Despite the rising NPLs, the overall banking sector remains resilient, with recapitalisation efforts boosting capital adequacy. Akinkunmi highlighted that the Capital Adequacy Ratio (CAR) improved from 10.81% in April 2024 to 15.55% in April 2025. Nineteen banks have raised additional capital, and seven have already met the new regulatory requirements. However, Nigeria’s CAR still falls short of international standards, indicating a need for continued reforms.

Positive Liquidity and Lending Indicators
Liquidity and profitability metrics also showed strength, with the system-wide Liquidity Ratio increasing from 50.6% to 55.4%, and net interest margins rising to 67.0%. The industry saw robust growth in assets, deposits, and loan disbursements. Between March and April 2025, banks issued over 19,000 new credit facilities valued at ₦417.1 billion, showcasing strong financial intermediation despite macroeconomic challenges.

CBN Tightens Oversight, Limits Risky Activities
The CBN, through Deputy Governor Muhammad Sani Abdullahi, assured the public that the central bank is closely monitoring the situation and remains committed to financial system stability. He emphasized that the NPL increase stems from technical reclassifications rather than a widespread decline in asset quality. Meanwhile, the CBN has ordered banks under regulatory forbearance to suspend dividend payments and executive bonuses, and to halt offshore investments—a move aimed at reinforcing capital buffers and ensuring prudent financial management.

Source: Nairametrics