Nigeria’s banking sector recorded a further decline in asset quality in January 2026, with the non-performing loans (NPL) ratio rising to 8.03 per cent, following the Central Bank of Nigeria’s (CBN) withdrawal of key regulatory forbearance measures.
The latest figure, contained in the CBN’s January 2026 Economic Report, represents an increase of 0.52 percentage points from 7.51 per cent recorded in December 2025 and remains well above the prudential benchmark of 5.0 per cent.
The rise in bad loans came seven months after the apex bank ended regulatory forbearance that previously allowed banks to restructure troubled facilities without immediately classifying them as impaired.
According to the CBN, the increase was driven largely by the reclassification of previously restructured loans after the withdrawal of the relief measures.
The report stated: “Following the Bank’s loan reclassification after the withdrawal of forbearance, the non-performing loans (NPLs) ratio rose by 0.52 percentage point to 8.03 per cent compared with the level in the preceding period and was above the 5.00 per cent prudential threshold.”
Despite the deterioration in asset quality, the banking sector maintained strong liquidity and capital buffers during the review period.
The industry liquidity ratio rose to 63.38 per cent in January 2026 from 57.22 per cent in December 2025, remaining far above the regulatory minimum of 30 per cent.
Similarly, the sector’s capital adequacy ratio stood at 12.05 per cent, slightly lower than 12.35 per cent recorded in the previous month, but still above the minimum regulatory requirement of 10 per cent.
The CBN said the capital position reflects the industry’s continued ability to absorb potential losses arising from credit and market risks despite the rise in impaired loans.
The apex bank noted that most financial soundness indicators remained within prudential thresholds, underscoring the resilience and stability of the banking system.
Nigeria’s banking industry had witnessed a renewed increase in bad loans in 2025 after the CBN withdrew pandemic-era regulatory reliefs that allowed lenders to restructure stressed facilities without classifying them as non-performing.
While maintaining that the financial system remained stable, the CBN warned that rising NPL levels could heighten credit risks as borrowers grapple with elevated interest rates and broader economic pressures.
The apex bank cautioned that sustained growth in bad loans could weaken banks’ profitability, reduce lending capacity and undermine overall risk resilience if credit discipline deteriorates.
As part of measures to strengthen credit discipline and safeguard financial system stability, the CBN also directed banks to restrict access to certain banking services for large borrowers with non-performing loans.
Under the directive, borrowers whose facilities are classified as non-performing and listed in the Credit Risk Management System (CRMS) or any licensed private credit bureau will no longer qualify for additional credit facilities.
