Banks’ Non-performing Loans Rise To 9.85% After CBN’s Forbearance Withdrawal

| Level nearly double of 5% acceptable threshold

Nigeria’s non-performing loans (NPLs) ratio rose to 9.85 per cent in February 2026 after the Central Bank of Nigeria (CBN) withdrew regulatory forbearance, and lenders reclassified previously deferred exposures, the apex bank said in its February 2026 Economic Report released on Wednesday.

According to the CBN’s February 2026 Economic Report, the deterioration in asset quality occurred despite the banking industry maintaining strong liquidity and capital buffers.

The February reading represents an increase from 8.03 per cent in January and sits well above the prudential threshold of 5.0 per cent set by the CBN.

The apex bank said loan reclassification following the end of forbearance contributed 1.82 percentage points to the higher NPL ratio.

“Asset quality, however, weakened following the withdrawal of regulatory forbearance, as loan reclassification drove the non-performing loans (NPLs) ratio higher by 1.82 percentage points to 9.85 per cent, exceeding the 5.00 per cent prudential threshold,” the report said.

The upward revision in NPLs comes amid broader efforts by regulators and banks to normalise balance-sheet reporting after temporary relief measures.

Analysts have noted that clearer, more conservative classifications should improve transparency in the medium term, even as headline NPL ratios rise in the short term.

The report stated that, “Asset quality, however, weakened following the withdrawal of regulatory forbearance, as loan reclassification drove the non-performing loans (NPLs) ratio higher by 1.82 percentage points to 9.85 per cent, exceeding the 5.00 per cent prudential threshold.”

Despite the rise in bad loans, the apex bank maintained that the financial system remained resilient, supported by strong liquidity and adequate capitalisation.

“The Nigerian banking sector sustained strong systemic resilience, with most financial soundness indicators remaining within regulatory benchmarks,” the report noted.

The industry liquidity ratio rose to 69.27 per cent in February from 63.38 per cent in January, remaining well above the prudential minimum of 30 per cent. The CBN said the development underscores banks’ strong capacity to meet short-term obligations and support financial intermediation.

Similarly, the capital adequacy ratio (CAR) improved to 12.55 per cent from 12.05 per cent in the preceding month, remaining above the regulatory minimum requirement of 10 per cent. According to the report, the improvement reflects the sector’s “robust solvency, and resilience against credit and market risks.”

The CBN further noted that monetary conditions eased during the review period, while liquidity in the banking system strengthened, contributing to lower interbank rates and supporting overall financial stability.