Nigeria’s banking sector is facing growing pressure after the ratio of non-performing loans climbed to 8.03 percent in January 2026.
Note that this is above the Central Bank of Nigeria’s prudential threshold of five percent, and it signals a deterioration in asset quality across the industry.
The increase come seven months after the apex bank began withdrawing key forbearance measures that had allowed banks to temporarily shield certain troubled loans from stricter classification rules.
The latest figure represents an increase from 7.51 percent recorded in December 2025. According to the CBN, the rise was largely driven by the reclassification of loans following the end of regulatory relief measures introduced during and after the COVID-19 pandemic. Those measures had enabled lenders to restructure distressed facilities without immediately categorising them as bad loans.
With the withdrawal of the forbearance programme, banks have been required to align affected credit exposures with existing prudential guidelines. As a result, several previously restructured loans have now been recognised as non-performing, exposing weaknesses that had remained hidden under temporary regulatory support.
The development is part of a broader effort by the CBN to strengthen discipline and resilience within the financial system. In June 2025, the regulator directed banks benefiting from forbearance arrangements to suspend dividend payments, defer executive bonuses and halt new investments in foreign subsidiaries until their capital and provisioning positions fully complied with regulatory standards.
The central bank has also intensified efforts to improve credit quality. Earlier this year, it ordered financial institutions to deny additional credit facilities and certain banking services to large borrowers with non-performing loans. The move is intended to reduce systemic risks associated with major loan defaults and improve repayment discipline across the sector.
Despite the rise in bad loans, key indicators suggest that the banking industry remains financially stable. The sector’s liquidity ratio stood at 63.38 percent in January, well above the regulatory minimum of 30 percent. Capital adequacy also remained above the required threshold, providing banks with a buffer against potential shocks.
However, regulators have warned that a sustained increase in non-performing loans could weaken bank balance sheets, impair asset quality and create broader risks for financial stability. Higher interest rates, currency pressures and challenging economic conditions have made debt servicing more difficult for some borrowers, increasing the likelihood of further loan defaults.
The latest figures highlight the challenges facing Nigerian banks as they adjust to tighter regulatory standards. While the sector remains adequately capitalised and liquid, the sharp rise in bad loans suggests that credit risk management will remain a major focus for regulators and financial institutions in the months ahead.
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Emmanuel Abara Benson is a business journalist and editor covering artificial intelligence, global markets, and emerging technology.
He has previously worked with Business Insider Africa and Nairametrics, reporting on finance, startups, and innovation.
His work focuses on AI, digital economy, and global tech trends.
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