Nigeria’s banking sector recorded a further deterioration in asset quality in January 2026, as the non-performing loans ratio rose to 8.03%, seven months after the Central Bank of Nigeria (CBN) ended key regulatory forbearance measures that had allowed banks to restructure troubled loans without immediately classifying them as impaired.
Data from the CBN’s January 2026 Economic Report showed that the NPL ratio increased by 0.52 percentage points from 7.51% in December 2025, remaining significantly above the prudential benchmark of 5.0%.
The increase followed the reclassification of loans after the withdrawal of regulatory forbearance, which required lenders to recognise previously restructured facilities as non-performing where applicable.
What the report says
According to the CBN, the deterioration in asset quality was directly linked to the withdrawal of forbearance and subsequent loan reclassification.
- The report read, “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% compared with the level in the preceding period and was above the 5.00 per cent prudential threshold.”
Despite the increase in non-performing loans, the banking sector maintained strong liquidity during the review period.
The industry’s liquidity ratio rose to 63.38% in January 2026 from 57.22% in the preceding month, remaining well above the regulatory minimum of 30%.
The improvement indicates that banks continued to hold sufficient liquid assets to meet short-term obligations and support financial intermediation activities.
Capital buffers remain resilient
The banking sector’s capital adequacy ratio stood at 12.05% in January 2026, compared with 12.35% in December 2025, but remained above the regulatory minimum requirement of 10%.
According to the CBN, the ratio underscores the industry’s ability to absorb potential losses arising from credit and market risks despite the rise in impaired loans.
The report noted that the banking industry remained resilient, with most financial soundness indicators staying within prudential thresholds and supporting overall financial system stability.
What you should know
Nairametrics earlier reported that Nigeria’s banking sector saw a fresh rise in bad loans in 2025 after the CBN withdrew the regulatory forbearance that allowed banks to restructure pandemic-hit facilities without classifying them as non-performing.
Despite the spike in bad loans, the apex bank reported that the financial system remained stable in 2025.
However, the CBN cautioned that the jump in NPLs exposes the sector to rising credit risk, especially as borrowers contend with higher interest rates and economic pressures.
It warned that elevated bad-loan levels could weigh on profitability, lending capacity and overall risk resilience if credit discipline weakens.
The CBN directed banks to restrict access to certain banking services for large-ticket borrowers with non-performing loans, as part of efforts to safeguard financial system stability and strengthen credit discipline.
According to the CBN, borrowers whose loan facilities are classified as non-performing and recorded in the Credit Risk Management System (CRMS) or any licensed private credit bureau will no longer be eligible to access additional credit facilities.
