At least 11 commercial banks in Nigeria surpassed the Central Bank of Nigeria’s (CBN) regulatory ceiling of five percent for non-performing loans (NPLs) as of April 2025, according to a disclosure by Monetary Policy Committee (MPC) member Mustapha Akinwunmi. The breach follows an industry-wide loan reclassification exercise carried out during the annual risk assessment. The NPL ratio rose to 5.62%, breaching the prudential benchmark and up from the previous year when only six banks had exceeded the threshold. Specific bank names were not disclosed.
Akinwunmi emphasized that the spike in NPLs is a reflection of improved transparency and stricter credit risk classification rather than an actual decline in asset quality. He noted that certain sectors, such as oil and gas—vulnerable to external shocks—could benefit from temporary regulatory relief. The breach occurred despite the CBN’s tight monetary policy stance, including maintaining the Monetary Policy Rate at 27.5% since November 2024 to curb inflation and stabilize the naira.
Despite the increase in bad loans, the broader health of Nigeria’s banking industry remains strong, buoyed by solid capital adequacy and liquidity. The capital adequacy ratio (CAR) improved significantly from 10.81% in April 2024 to 15.55% in April 2025, attributed to the ongoing bank recapitalization drive. Nineteen banks have raised fresh capital, and seven have already met the new regulatory requirements, although the country’s CAR still trails behind global standards.
The financial system has shown robust growth across key indicators. Liquidity ratios climbed from 50.6% in January to 55.4% in March, while net interest margin reached 67.0% in April, supported by cost efficiencies. The total asset base of banks grew by N30.83 trillion year-on-year, with deposits increasing by N19.93 trillion and credit to the economy expanding by N5.99 trillion. Notably, banks issued over 19,500 new loans worth N417.1 billion between March and April 2025.
In response to these developments, the CBN has ordered banks under regulatory relief to suspend dividend payments, executive bonuses, and offshore investments. This directive targets institutions with temporary forbearance on credit or Single Obligor Limit (SOL) breaches. The central bank aims to fortify the banking sector by enhancing capital buffers, promoting prudent capital retention, and reinforcing balance sheet stability in the face of ongoing economic pressures.
Source: Leadership