Non-performing loans (NPLs) in Nigeria’s banking sector rose to 8.03 per cent in January 2026, exceeding the Central Bank of Nigeria’s (CBN) prudential threshold of five per cent, following the withdrawal of regulatory forbearance granted to banks on certain credit exposures.
CBN
The latest figure, contained in the CBN’s January 2026 Economic Report, represents an increase of 0.52 percentage points from the 7.51 per cent recorded in December 2025.
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According to the report, the rise in bad loans followed the reclassification of credit facilities after the apex bank terminated regulatory reliefs that had previously allowed banks to restructure troubled loans without classifying them as non-performing.
“Following the bank’s loan reclassification after the withdrawal of forbearance, the non-performing loans 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,” the report stated.
The development comes seven months after the CBN directed banks benefiting from regulatory forbearance on credit exposures and single obligor limit breaches to suspend dividend payments, defer bonuses for directors and senior management, and halt new investments in foreign subsidiaries and offshore ventures.
The measures were introduced to strengthen capital buffers, improve balance-sheet resilience and ensure affected institutions retained earnings while exiting temporary regulatory support.
The withdrawal of COVID-19-related forbearance and waivers on single obligor limits, which took effect on June 30, 2025, has resulted in several previously restructured loans being reclassified as non-performing, contributing to the increase in industry-wide bad loans.
Analysts say the latest figures indicate that weaker loan assets previously cushioned by regulatory relief are now being fully recognised on banks’ balance sheets.
In its macroeconomic outlook report, the CBN warned that a significant increase in bad loans could weaken asset quality and pose risks to financial system stability.
The apex bank also advocated deeper integration of the Global Standing Instruction (GSI) framework across financial institutions to improve loan recovery and strengthen credit discipline.
As part of broader reforms, the CBN had earlier directed bank directors with non-performing insider-related loans to resign from their positions and mandated banks to recover such debts through collateral enforcement, including the seizure of pledged shareholdings.
More recently, the regulator introduced restrictions on large borrowers with non-performing loans, barring them from accessing additional credit facilities and certain banking services.
Under the directive, financial institutions are prohibited from granting new loans, letters of credit, performance bonds and other contingent liabilities to large-ticket obligors whose non-performing facilities are recorded in the Credit Risk Management System (CRMS) or licensed private credit bureaus.
Despite the deterioration in asset quality, the CBN maintained that the banking sector remained resilient.
The report showed that the industry’s liquidity ratio improved to 63.38 per cent in January from 57.22 per cent in December, remaining well above the regulatory minimum of 30 per cent.
Similarly, the capital adequacy ratio stood at 12.05 per cent, slightly lower than the 12.35 per cent recorded in December but above the minimum requirement of 10 per cent.
“The Nigerian banking industry remained resilient, with most financial soundness indicators staying within prudential regulatory thresholds, affirming financial stability and institutional soundness,” the report stated.
However, members of the CBN’s Monetary Policy Committee (MPC) have expressed concern over the rising level of bad loans.
The CBN Deputy Governor for Economic Policy, Muhammad Abdullahi, warned that increasing NPLs could undermine financial stability and weaken the transmission of monetary policy.
He noted that the challenge was occurring alongside persistent excess liquidity in the banking system, potentially affecting the flow of credit to productive sectors.
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Also speaking, MPC member Aku Odinkemelu called for stronger regulatory oversight, saying the rise in non-performing loans underscored the need for heightened supervisory vigilance to protect asset quality and ensure effective credit transmission.
Industry observers say the latest data present a mixed outlook for the banking sector, with strong liquidity and capital positions offset by growing concerns over asset quality as banks adjust to stricter prudential standards following the end of regulatory forbearance.
