Nigeria’s banking sector has recorded a sharp rise in non-performing loans (NPLs), with the ratio climbing to 9.85 per cent in February 2026 following the Central Bank of Nigeria’s (CBN) withdrawal of regulatory forbearance. The latest figure, disclosed in the apex bank’s February 2026 Economic Report, marks a significant increase from 8.03 per cent recorded in January and stands almost double the CBN’s prudential benchmark of five per cent.
The increase reflects a major shift in how banks classify loans after temporary relief measures introduced in previous years came to an end. According to the CBN, the reclassification of previously deferred loan exposures contributed 1.82 percentage points to the rise in bad loans. While the development has pushed asset quality indicators into concerning territory, regulators say it also signals a move toward more transparent and realistic reporting across the banking industry.
Despite the deterioration in asset quality, the CBN insists that Nigeria’s financial system remains stable and resilient. The report noted that most financial soundness indicators continued to perform within regulatory limits, supported by strong liquidity levels and adequate capital buffers. Analysts believe the current increase in NPLs may represent a short-term adjustment as banks align their books with stricter reporting standards.
The banking sector’s liquidity position remained particularly strong during the review period. Industry liquidity ratio rose to 69.27 per cent in February from 63.38 per cent in January, comfortably exceeding the regulatory minimum requirement of 30 per cent. This indicates that banks still possess sufficient cash and liquid assets to meet customer obligations and sustain lending activities across the economy.
Capital adequacy also improved, providing further reassurance about the sector’s ability to absorb potential shocks. The capital adequacy ratio increased to 12.55 per cent from 12.05 per cent in January, remaining above the minimum regulatory threshold of 10 per cent. The CBN added that easing monetary conditions and improved banking system liquidity helped reduce interbank rates, reinforcing overall financial stability even as concerns over rising bad loans continue to draw attention.
source: Leadership