Central Bank Projects $18.8bn Current Account Surplus

… As banks face rising non-performing loan risks

The Central Bank of Nigeria (CBN) has projected an improvement in the country’s external position for 2026, with the current account surplus expected to rise to $18.81 billion, despite the banking system’s challenges in addressing elevated non-performing loan risks amid ongoing reforms and tightening credit conditions.

In its 2026 Macroeconomic Outlook, the apex bank stated that the widening current account surplus would be driven by stronger export earnings, steady diaspora remittances, higher oil and gas output, and increased domestic refining capacity. These factors are expected to offset import demand and support a more resilient balance of payments position, reinforcing confidence in the foreign exchange market.

According to the apex bank, the positive trend in the external position is expected to be sustained this year, “supported by strong exports, steady remittances inflow, increased oil & gas output, improved domestic refining capacity and rising global demand from key trading partners.

“The current account surplus is expected to rise to $18.81 billion, while increased portfolio investment inflows and external borrowings are projected to keep the financial account in a net borrowing position of $10.15 billion.” The CBN report stated

Aside from the current account gains, the CBN projects that the financial account will remain in a net borrowing position of $10.15 billion this year, reflecting sustained portfolio inflows and external borrowings attracted by relatively high yields and improving investor sentiment. It also noted that the inflows, combined with stronger trade earnings, are expected to increase external reserves to approximately $51.04 billion by the end of 2026, thereby strengthening Nigeria’s external buffers.

However, the CBN cautioned that Nigeria’s International Investment Position will remain profoundly negative at an estimated $69.58 billion in 2026, underscoring the country’s continued reliance on external liabilities. While recent reforms have improved short-term flows, the CBN stressed the need to sustain export diversification and carefully manage the cost and structure of foreign capital to reduce vulnerabilities over time.

Meanwhile, the CBN outlook highlighted rising concerns about asset quality. According to the report, non-performing loans in the banking sector are estimated at approximately 7.0 per cent, exceeding the prudential benchmark of 5.0 per cent, mainly due to the withdrawal of regulatory forbearance granted during the COVID-19 period. The apex bank warned that a further deterioration in credit quality could impair banks’ balance sheets and pose risks to financial stability if not carefully managed.

“The Non-performing Loans (NPLs) ratio stood at an estimated 7.00 per cent relative to the prudential limit of 5.00 per cent. The level of NPLs reflected the withdrawal of the regulatory forbearance granted to banks during the COVID-19 pandemic.

“Rising NPLs pose a direct threat to banks’ profitability, credit availability, and overall risk-bearing capacity. This underscores the need to sustain measures to ensure that worsening NPLs do not weaken banks’ balance sheets, impair asset quality, and trigger systemic contagion.

“Although recent gains in capital adequacy and liquidity ratios provide a buffer, these indicators remain susceptible to unforeseen macroeconomic shocks. An increase in credit losses or foreign exchange illiquidity could erode capital reserves, breach prudential thresholds, and strain liquidity coverage. These conditions could disrupt financial intermediation, diminish market confidence, and amplify vulnerabilities across the banking sector.

Despite these risks, the CBN stated that the banking system remains broadly resilient, supported by strong liquidity buffers, ongoing recapitalisation, and improved profitability from higher interest income. The recapitalisation exercise is expected to enhance banks’ shock-absorbing capacity and position them to better support economic growth, even as credit risks remain elevated.

“The Nigerian banking sector remained stable, as key Financial Soundness Indicators (FSIs) broadly aligned with prudential benchmarks in 2025. The LR stood at 65.00 per cent, significantly above the 30.00 per cent regulatory minimum and 48.94 per cent as of December 2024, reflecting the banking sector’s ability to meet maturing obligations. Similarly, the capital adequacy ratio (CAR) stood at 11.60 per cent and remained above the regulatory minimum of 10.00 per cent, underscoring the sector’s capacity to absorb credit and market shocks.