Nigeria’s banking sector is facing growing pressure as the ratio of bad loans increased to 8.03 per cent in January 2026, exceeding the regulatory benchmark set by the Central Bank of Nigeria (CBN).
According to the CBN’s January 2026 Economic Report, non-performing loans (NPLs) rose from 7.51 per cent in December 2025, representing a 0.52 percentage-point increase within one month. The latest figure remains significantly above the apex bank’s recommended maximum threshold of five per cent, raising concerns about the quality of assets held by banks.
The increase comes several months after the CBN ended regulatory forbearance measures that had allowed banks to temporarily avoid classifying certain troubled loans as non-performing. These relief measures were initially introduced to help financial institutions manage the impact of economic disruptions, including those caused by the COVID-19 pandemic.
With the withdrawal of the support programme, banks were required to reassess and reclassify affected loans based on existing prudential guidelines. As a result, several loans that had previously been restructured or protected under regulatory relief were officially recognised as bad loans, leading to the increase in the industry’s NPL ratio.
In June 2025, the CBN introduced stricter measures for banks that were still benefiting from regulatory waivers. These institutions were directed to suspend dividend payments, postpone executive bonuses, and stop making new investments in foreign subsidiaries or offshore ventures. The regulator said the move was necessary to strengthen capital reserves and improve financial resilience.
The apex bank has also intensified efforts to improve loan recovery and strengthen credit discipline across the financial sector. It encouraged wider adoption of the Global Standing Instruction (GSI) framework, which allows lenders to recover outstanding debts from borrowers through linked accounts held in other financial institutions.
As part of broader reforms, the CBN had earlier ordered directors with insider-related non-performing loans to resign from bank boards. Such loans involve facilities granted to directors, executives, employees, shareholders, or related parties. Banks were instructed to recover the debts through collateral enforcement, including the seizure of affected directors’ shareholdings where necessary.
The regulator further tightened lending standards in March 2026 by directing banks to deny additional credit facilities and certain banking services to major borrowers with outstanding non-performing loans. The restrictions apply to individuals and companies classified as large-ticket borrowers whose debts could pose significant risks to the financial system.
Despite the rise in bad loans, the CBN maintains that the banking industry remains stable. The report showed that the sector’s liquidity ratio improved to 63.38 per cent in January, well above the minimum regulatory requirement of 30 per cent. Similarly, the capital adequacy ratio stood at 12.05 per cent, exceeding the required minimum of 10 per cent.
However, policymakers remain cautious. Members of the Monetary Policy Committee have warned that rising bad loans could threaten financial stability if not properly managed. Factors such as high interest rates, currency depreciation, legacy loan exposures, and stricter loan classification rules continue to place pressure on banks.
While the sector remains resilient overall, the growing level of non-performing loans highlights the challenges facing financial institutions as they adjust to tighter regulations and a more demanding economic environment. The CBN is expected to continue monitoring asset quality closely while enforcing measures aimed at strengthening credit management and preserving financial stability.
