Bad loans in Nigeria’s banking sector rose to 8.03 per cent in January 2026, seven months after the Central Bank of Nigeria moved to end regulatory forbearance granted to banks on some credit exposures and single obligor limit breaches. The figure, contained in the CBN’s January 2026 Economic Report, showed that the industry’s non-performing loans ratio rose by 0.52 percentage point from 7.51 per cent in December 2025.
It also remained above the CBN’s prudential threshold of five per cent, indicating a further deterioration in asset quality across the banking industry despite the apex bank’s insistence that the sector remained resilient. The report said, “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 development came after the CBN, in June 2025, directed banks still benefiting from regulatory forbearance on credit exposures or single obligor limit waivers to suspend dividend payments, defer bonuses to directors and senior management, and halt fresh investments in foreign subsidiaries or offshore ventures.
The regulator said the measure was aimed at strengthening capital buffers, improving balance sheet resilience, and forcing affected banks to retain earnings while exiting temporary regulatory reliefs. In a separate transition measure, the apex bank also moved to terminate COVID-19-related regulatory forbearance and waivers on single obligor limits effective June 30, 2025, requiring banks to align affected credit exposures with existing prudential guidelines.
Regulatory forbearance had allowed banks to restructure loans affected by the pandemic without immediately classifying them as non-performing. With the withdrawal of the measure, a number of previously restructured facilities have now crystallised as bad loans, pushing the industry ratio above the regulatory ceiling.
The latest NPL reading suggests that the clean-up is beginning to expose weaker loans that had previously been cushioned by regulatory reliefs. Once those loans were reclassified, banks had to recognise more credit weakness on their books, pushing the industry’s bad loan ratio further above the regulatory limit.
In its macroeconomic outlook report, the CBN warned that a “significant rise in non-performing loans could impair asset quality and weaken banks’ balance sheets, thereby posing systemic risk,” showing the importance of monitoring credit risk and sustaining prudential discipline.
It also recommended deepening “the operational integration of the GSI framework across all financial institutions to enhance loan recovery efficiency and credit discipline.” The CBN also recommended strengthening credit discipline and reducing non-performing loans by fully integrating the Global Standing Instruction framework to boost loan recovery efficiency.
Earlier, in February 2025, the apex bank ordered bank directors with non-performing insider-related loans to step down immediately. Insider loans refer to loans granted by a bank to its own executives, directors, employees, major shareholders, or related parties.
According to the CBN, the decision aims to strengthen corporate governance and improve risk management in the banking sector. To minimise financial risks, the apex bank instructed banks to recover debts through collateral enforcement and seize the shareholdings of affected directors.
“Directors with non-performing insider-related facilities are required to step down immediately from the board, while the bank should commence immediate remediation of the loans through the recovery of the collateral, including the shareholdings of the affected directors,” the circular read.