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Banks: Bad loans rise after CBN ends forbearance

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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.

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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.

More recently, the CBN directed banks to deny certain banking services and additional credit facilities to large borrowers with non-performing loans as part of measures to strengthen credit discipline in the banking sector. The directive was contained in a letter dated March 12, 2026, and signed by the Director of Banking Supervision, Dr. Muhammad Abdullahi.

Under the directive, borrowers whose loan facilities have been classified as non-performing and recorded in the Credit Risk Management System or any licensed private credit bureau will no longer be eligible to obtain additional credit from banks.

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The apex bank said the measure was designed to reduce risks posed by large borrowers whose defaults could threaten financial system stability. “Effective immediately, all financial institutions shall: Restrict further credit access: Any large-ticket obligor with a non-performing facility recorded in the CRMS and/or any licensed private credit bureau shall not be granted additional credit facilities.

“For the purpose of this restriction, credit facilities include loans and other forms of direct credit. In addition, such obligors shall not be granted banking facilities or contingent liabilities such as bankers’ confirmations, letters of credit, performance bonds, or advance payment guarantees,” the bank said.

The CBN explained that the restrictions apply to borrowers classified as large-ticket obligors under the prudential guidelines for deposit money banks. According to the regulator, such borrowers include individuals or companies whose combined exposure across banks exceeds the Single Obligor Limit or whose financial obligations could significantly affect a bank’s capital adequacy ratio.

The bank also directed financial institutions to obtain additional realisable collateral from affected borrowers to adequately secure existing loan exposures. It said the determination of affected borrowers would rely on information captured in the Credit Risk Management System and reports from licensed private credit bureaus.

However, the CBN maintained that the wider banking system remained stable. The report showed that the industry’s liquidity ratio improved to 63.38 per cent in January from 57.22 per cent in December, staying well above the 30 per cent prudential minimum.

The capital adequacy ratio stood at 12.05 per cent, lower than 12.35 per cent in December, but still above the 10 per cent regulatory minimum. According to the CBN, “The Nigerian banking industry remained resilient, with most financial soundness indicators staying within prudential regulatory thresholds, affirming financial stability and institutional soundness.”

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The figures indicate a mixed picture for the banking sector. Liquidity remains strong, and capital levels are still above the minimum benchmark, but the rise in bad loans points to pressure from legacy exposures, currency devaluation, high interest rates, and tighter regulatory classification.

The worsening asset quality in the banking sector also drew concern from members of the CBN’s Monetary Policy Committee during its February 2026 meeting, with policymakers warning that rising bad loans could threaten financial stability despite broader improvements in macroeconomic conditions.

The CBN’s Deputy Governor for Economic Policy, Dr Muhammad Abdullahi, said increasing non-performing loans had emerged as a key risk to the financial system and could undermine the effectiveness of monetary policy transmission if left unchecked. “Additionally, rising NPLs could pose financial stability risks, and the broader macroeconomy needs to rebalance growth and stability objectives,” Abdullahi said.

The deputy governor noted that the challenge was occurring alongside persistent excess liquidity in the banking system, warning that both factors could weaken the impact of monetary policy measures and limit the efficient flow of credit to productive sectors of the economy.

Echoing similar concerns, MPC member and corporate governance expert Aku Odinkemelu said the increase in bad loans required closer regulatory scrutiny. “The increase in Non-Performing Loans within the banking system… underscores the need for heightened supervisory vigilance to safeguard asset quality and ensure effective credit transmission,” Odinkemelu said.

The comments suggest that while the banking sector remains broadly resilient, regulators are increasingly focused on the quality of loan assets as the industry adjusts to stricter prudential rules following the withdrawal of regulatory forbearance.

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Nigerian states’ revenues rise 93%, but education spending drops — World Bank

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The World Bank says Nigeria’s 36 states recorded a 93 per cent increase in revenues between 2023 and 2025 but education received a declining share of the sector’s expenditure.

The bank disclosed this in its latest Nigeria Development Update, which examined how increased public revenues have influenced spending priorities across the federation.

The report was made available to the News Agency of Nigeria by the World Bank in Washington D.C.

According to the report, states’ aggregate revenues rose by approximately 93 per cent in real terms, while expenditure increased by 92 per cent during the period.

The report attributed the improvement partly to exchange-rate reforms, petrol subsidy removal, stronger revenue administration and increased allocations from the federation account.

It said states also benefited from refunds, settlement of longstanding federal obligations, intervention funds, and stronger Value Added Tax collections.

However, education’s share of total state expenditure declined from 14.9 per cent in 2021 to 12.1 per cent in 2025, according to the report.

Health expenditure remained broadly stable at approximately seven per cent, while social protection’s share increased from 1.4 per cent to 4.4 per cent.

The bank said capital expenditure increased significantly, accounting for 61 per cent of state spending, compared with 46 per cent previously.

Transport infrastructure recorded the largest increase, alongside substantial spending on housing, agriculture and other economic investments.

The report quoted Mathew Verghis, the World Bank Country Director for Nigeria, as saying that increased revenues provided the opportunity to improve infrastructure, education, healthcare, and water services.

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He said greater spending efficiency, accountability and improved service delivery were essential to ensuring that additional public resources benefited Nigerians.

The bank acknowledged improvements in states’ fiscal reporting, transparency and internally generated revenue.

It, however, stressed that stronger investment in human capital was necessary to translate economic reforms into sustainable employment and improved living standards.

The report also projected average economic growth of 4.4 per cent between 2026 and 2028, subject to sustained reforms and improved service delivery.

It urged federal and state authorities to ensure that increased public revenues translated into tangible improvements in Nigerians’ welfare.

NAN

Source: punchng.com

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Nigeria promotes investment without building production capacity – UNILAG don

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A professor of Comparative Political Economy at the University of Lagos, Adelaja Odukoya, has asserted that Nigeria’s economic policies promote investment without sufficiently strengthening domestic production.

Odukoya argued that the contradiction had weakened the country’s productive foundations, with policies encouraging investment and entrepreneurship while failing to create the technological capacity, productive employment and processing industries needed to drive sustainable development.

Odukoya spoke at the maiden edition of the Adeleke University Toyin Falola Annual Lecture, held on Thursday at the Performing Arts Theatre, Adeleke University, Ede.

The lecture had as its theme, “History, Power and Accumulation: Reimagining Africa in the Globally Disorderly Order.”

Odukoya identified several contradictions in the way the Nigerian state manages economic activity.

He said, “The state promotes investment without creating conditions for technological transfer. It encourages entrepreneurship without generating sufficient productive employment.

“It expands primary-product exports while leaving processing capacity undeveloped. It constructs infrastructure without establishing strong linkages with domestic production.”

According to him, the contradictions explain why increased economic activity and accumulation do not necessarily translate into development.

“Accumulation is not synonymous with development,” Odukoya stated.

He argued that genuine development should be measured by the expansion of productive, technological, institutional and human capabilities.

“A country could attract investment, export minerals and agricultural commodities and record economic activity while still failing to build the domestic industries and technological capabilities required for long-term development,” he said.

His argument was echoed by Prof Toyin Falola, who said Africa’s vast natural resources would continue to reinforce dependency unless governments developed the industrial, technological and institutional capacity to transform them into productive power.

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Falola said Africa’s resource problem was not simply one of historical exploitation, but also the continent’s failure to convert its resource endowments into power.

“The issue, however, is not just to repeat the history of exploitation. It is more important to know how Africa turns its great resources into power,” Falola said.

He argued that Africa could not afford to remain a spectator as global economic and geopolitical arrangements continued to change, stressing that resource ownership without the capacity to add value would not guarantee influence.

Falola said the continent required a combination of knowledge, government policy and industrial capacity to change its economic position.

“There must be universities that generate new knowledge; there must be governments that translate this knowledge into policies; there must be industries that add value to the continent’s natural resources,” he said.

He added that Africa needed more than improved infrastructure and stronger economies if it wanted to exercise greater influence in the global system.

“The future of the continent will require more than just better infrastructure, improved economies, and more effective political institutions,” Falola said.

Source: punchng.com

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Import waivers, insecurity end two-year agric trade surplus

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Import waivers meant to ease hunger and insecurity on farms have led to a deficit, ending a two-year run of surpluses, as Nigeria’s agricultural trade balance swung from a N740.27bn surplus in the first half of 2025 to a N56.13bn deficit in H1 2026, according to agriculture and trade experts.

Recent foreign trade data from the National Bureau of Statistics showed that agricultural exports fell by 33.28 per cent, or N985.14bn, to N1.98tn in H1 2026 from N2.96tn in H1 2025.

Agricultural imports fell by only 8.50 per cent, or N188.74bn, to N2.03tn from N2.22tn over the same period. The gap between the two movements produced a N796.40bn swing in the trade balance.

Nigeria recorded a N365.74bn deficit in H1 2023, when imports of N926.25bn far exceeded exports of N560.51bn. The balance then turned to a N194.92bn surplus in H1 2024 before it widened to N740.27bn in H1 2025.

In separate phone interviews with The PUNCH, Agribusiness experts, including the Chairman of the Lagos Chamber of Commerce and Industry’s Agricultural and Allied Group, Tunde Banjoko, explained that recent government policy led to the shift.

Banjoko said, “Some waivers were given for products like palm oil and rice, and the import tariffs were drastically reduced. It became more favourable for people to import than to patronise local producers.”

He said the waivers on food commodities hurt domestic producers, even though lower tariffs on tractors and manufacturing equipment helped them.

According to Banjoko, “The effect is that our imports will rise above our exports. Second, we will discourage local production. Thirdly, we will be reducing employment, because some factories will shut down if they are not able to compete.”

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Banjoko also said weak funding for processors compounds the problem. He said foreign direct investment flows mainly into the capital market rather than into production and processing, so local processors cannot scale.

He urged the Federal Government to speed up the Special Agro-Industrial Processing Zones programme. “We should speed up such projects where we can produce enough for our country and start exporting, not look for shortcuts by reducing prices,” Banjoko added.

Meanwhile, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, identified two major factors behind the deficit. He said the first was the Federal Government’s decision to allow some food imports to tackle runaway inflation.

Yusuf said, “The first is the decision of the government to allow for some food imports as a result of the challenges of food inflation, which at a point was getting almost completely out of hand.”

He added that insecurity worsened the supply gap and cut export capacity, stating, “Insecurity led many farmers to leave their farms. Many of them have ended up in IDP camps, and quite a number have completely abandoned farming.”

He added that farmers cannot export without output. Yusuf said, “You can only export when you have the output.”

Yusuf also said high input costs and falling produce prices have discouraged farming. He said, “Most of these inputs are imported, so the exchange rate situation has seriously affected the cost of inputs, and the prices of produce have gone down.”

He urged the Federal Government to cut the cost of fertiliser, agrochemicals, machinery and improved seedlings. He also called for a minimum guaranteed price for agricultural produce.

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Yusuf said, “The government can establish a threshold below which, if prices fall, it will give farmers some compensation. That is the way it is done in many other economies.”

Source: punchng.com

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