Commercial Banks Exceed Regulatory Limit for Non-Performing Loans

Strategic Insights -

Commercial banks in Nigeria exceeded the 5 percent regulatory limit for non-performing loans (NPL) in April 2025, marking an increase from only six banks a year earlier. The industry-wide NPL ratio rose to 5.62 percent due to loan reclassifications following annual risk assessments. The Central Bank of Nigeria (CBN) has directed banks under regulatory moderation to halt dividend payments, executive bonuses, and offshore investments to enhance financial stability.

Key Takeaways:

  • Eleven commercial banks exceeded the 5 percent regulatory limit for non-performing loans (NPL) in April 2025, up from six a year earlier.
  • The industry-wide NPL ratio rose to 5.62 percent due to loan reclassifications following annual risk assessments.
  • The CBN might consider temporary forbearance measures for sectors like oil and gas that are more exposed to global shocks.
  • The breach in NPL limits comes amid sustained monetary tightening, with the CBN holding its Monetary Policy Rate at 27.5 percent since November 2024.
  • Strong capital buffers and liquidity positions support the overall health of the banking industry.
  • The rise in non-performing loans does not reflect a structural decline in loan quality, according to CBN deputy governor Muhammad Sani Abdullahi.
  • The industry's capital adequacy ratio surged from 10.81 percent in April 2024 to 15.55 percent in April 2025, highlighting progress under the CBN's ongoing bank recapitalisation drive.
  • Nineteen banks have raised additional capital, and 7 have met new requirements as part of the ongoing bank recapitalisation efforts.
  • The system-wide liquidity ratio was reported at 50.6 percent in January to 55.4 percent by March.
  • Net interest margin jumped to 67.0 percent in April, driven by reduced operating costs.
  • Total assets grew by N30.83 trillion (22.35%), deposits rose by N19.93 trillion (23.58%), and credit to the economy expanded by N5.99 trillion (10.89%) year-on-year.
  • Banks issued 19,504 new loans worth N417.1 billion between March and April alone, reflecting sustained lending activity despite economic headwinds.

Statistics:

  • 11 commercial banks exceeded the 5 percent regulatory limit for non-performing loans (NPL) in April 2025.
  • The industry-wide NPL ratio rose to 5.62 percent in April 2025.
  • 19 banks have raised additional capital, and 7 have met new requirements as part of the ongoing bank recapitalisation efforts.
  • The system-wide liquidity ratio was reported at 50.6 percent in January to 55.4 percent by March.
  • Net interest margin jumped to 67.0 percent in April.
  • Total assets grew by N30.83 trillion (22.35%).
  • Deposits rose by N19.93 trillion (23.58%).
  • Credit to the economy expanded by N5.99 trillion (10.89%).
  • 19,504 new loans worth N417.1 billion were issued between March and April alone.

Sources:

  • Mustapha Akinwunmi, member of CBN's Monetary Policy Committee (MPC)
  • Muhammad Sani Abdullahi, CBN deputy governor for Economic Policy
  • Central Bank of Nigeria (CBN) press release dated May 2025