More Nigerians Struggle to Repay Bank Loans as Bad Loans Hit 8.03%

Nigeria’s banking sector is facing renewed pressure as non-performing loans (NPLs) climbed to 8.03% in January 2026, highlighting the growing impact of the Central Bank of Nigeria’s decision to end key regulatory forbearance measures introduced during periods of economic stress.

Fresh data from the Central Bank of Nigeria’s January 2026 Economic Report showed that the industry’s bad loan ratio rose from 7.51% in December 2025 to 8.03% in January 2026. The figure remains well above the CBN’s prudential benchmark of 5%.

The rise comes seven months after the apex bank withdrew regulatory relief measures that previously allowed lenders to restructure struggling loans without immediately classifying them as impaired.

CBN Links Increase to Loan Reclassification

According to the CBN, the deterioration in asset quality was largely driven by the reclassification of previously restructured loans following the withdrawal of regulatory support.

The report stated that the banking sector’s NPL ratio increased by 0.52 percentage points during the review period after lenders reassessed facilities that no longer qualified for special treatment.

The latest figures suggest that several borrowers continue to struggle with repayment obligations amid high borrowing costs, inflationary pressures, foreign-exchange volatility, and weaker consumer demand.

The development also signals rising credit risk exposure for lenders at a time when economic conditions remain tight for businesses and households.

Liquidity Position Remains Strong

Despite the rise in impaired loans, the banking sector maintained a strong liquidity position in January 2026.

The industry’s liquidity ratio increased to 63.38% from 57.22% recorded in December 2025. The figure remains significantly above the regulatory minimum requirement of 30%.

The improvement indicates that banks still hold enough liquid assets to meet short-term obligations and continue lending activities across the economy.

Analysts say the strong liquidity position offers some buffer against immediate financial stress, even as asset quality weakens.

Capital Adequacy Still Above Regulatory Threshold

The sector’s capital adequacy ratio stood at 12.05% in January 2026, slightly lower than the 12.35% recorded in December 2025.

However, the figure remains above the regulatory minimum benchmark of 10%, suggesting that Nigerian banks still maintain sufficient capital buffers to absorb potential losses.

The CBN noted that most financial soundness indicators remained within acceptable prudential limits despite deteriorating loan quality.

According to the regulator, the banking industry continues to show resilience, supported by strong liquidity levels and stable capital buffers.

Pressure Mounts on Borrowers

The latest rise in bad loans follows earlier warnings from the CBN about increasing credit risks within the financial system.

The apex bank previously cautioned that higher non-performing loans could weaken profitability, reduce banks’ lending capacity, and increase overall financial vulnerability if credit discipline declines further.

In response, the CBN has tightened restrictions on defaulting borrowers.

The regulator directed banks to deny additional credit facilities to customers whose loans are classified as non-performing and captured in the Credit Risk Management System or licensed credit bureaus.

The move forms part of broader efforts to strengthen credit culture, improve loan recovery, and protect financial system stability.

Industry analysts expect banks to become more cautious in loan creation over the coming months as lenders focus on risk management and balance sheet protection following the end of the regulatory relief era.