Nigeria’s banking sector experienced a further decline in asset quality in January 2026, with the non-performing loans (NPL) ratio rising to 8.03%. This marks a notable increase seven months after the Central Bank of Nigeria (CBN) ended key regulatory forbearance measures that had previously allowed lenders to restructure troubled loans without immediately classifying them as impaired.
According to the CBN’s January 2026 Economic Report, the NPL ratio climbed by 0.52 percentage points from 7.51% in December 2025, remaining significantly above the prudential benchmark of 5.0%. The rise followed the reclassification of loans after the withdrawal of forbearance, which required banks to recognize previously restructured facilities as non-performing where applicable. The CBN attributed the deterioration in asset quality directly to this policy change and subsequent loan reclassification.
Despite the increase in impaired loans, the banking sector maintained strong liquidity during the review period. The industry’s liquidity ratio rose to 63.38% in January 2026, up from 57.22% in the preceding month, and remained well above the regulatory minimum of 30%. This improvement indicates that banks continued to hold sufficient liquid assets to meet short-term obligations and support financial intermediation activities.
The 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, this 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.
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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 financial stability.
