Nigeria’s Banks Face Rising Bad Loans as CBN Ends Regulatory Forbearance, NPL Ratio Hits 8.03%
Nigeria’s banking sector is under fresh pressure as bad loans climbed to 8.03 per cent in January 2026, following the Central Bank of Nigeria’s (CBN) decision to withdraw long-standing regulatory forbearance measures. The latest figure, contained in the CBN’s January 2026 Economic Report, shows a steady deterioration in asset quality across the industry, even as regulators insist the system remains fundamentally strong.
The non-performing loans (NPL) ratio rose from 7.51 per cent in December 2025 to 8.03 per cent, staying well above the CBN’s five per cent prudential benchmark. According to the apex bank, the increase was largely driven by the reclassification of loans after the withdrawal of forbearance, which had previously allowed banks to restructure troubled credit facilities without immediately marking them as bad loans.
The CBN had begun tightening its stance in mid-2025, directing banks benefiting from forbearance to suspend dividend payments, delay bonuses, and halt new offshore investments. It also ended COVID-era waivers on single obligor limits, forcing lenders to realign risky exposures with stricter prudential guidelines. While these steps were aimed at strengthening capital buffers and improving transparency, they have now exposed weak loans that were previously masked by regulatory relief.
Despite the rise in bad loans, the banking sector still shows signs of resilience. The report revealed that liquidity improved significantly to 63.38 per cent, well above the 30 per cent minimum requirement, while the capital adequacy ratio stood at 12.05 per cent, above the regulatory threshold of 10 per cent. However, analysts warn that rising credit risk, driven by legacy exposures, currency pressures, and high interest rates, could weigh on future stability if not addressed.
CBN officials and members of the Monetary Policy Committee have expressed concern that rising NPLs could threaten financial stability and weaken credit flow to the real economy. The apex bank has since intensified enforcement measures, including restricting new credit to defaulting large borrowers and strengthening loan recovery frameworks such as the Global Standing Instruction system. While regulators maintain that the sector remains stable, the growing level of bad loans signals a tightening phase for Nigeria’s banking industry as it adjusts to stricter oversight.
source: punch