CBN: Withdrawal of COVID-19 Forbearance Drives Nigerian Banks' NPLs Ratio

• The Central Bank of Nigeria's (CBN) withdrawal of COVID-19 regulatory forbearance has pushed banks' Non-Performing Loans (NPLs) ratio above 9.94 per cent in Q1'26.
• This increase exceeds the CBN's prudential benchmark of 5.0 per cent, indicating a significant risk to bank financial stability.
• The withdrawal of forbearance measures has exposed underlying issues in banks' loan portfolios, forcing them to confront non-performing loans.

According to data released by the CBN, the NPLs ratio rose to 9.94 per cent in the first quarter of 2026 (Q1'26), exceeding the apex bank's prudential benchmark of 5.0 per cent.

In a significant development, the withdrawal of the Central Bank of Nigeria's (CBN) COVID-19 regulatory forbearance has led to an increase in banks' Non-Performing Loans (NPLs) ratio. According to data released by the CBN, the NPLs ratio rose to 9.94 per cent in the first quarter of 2026 (Q1'26), exceeding the apex bank's prudential benchmark of 5.0 per cent. This increase is a direct result of the withdrawal of the forbearance measures put in place during the COVID-19 pandemic, which had temporarily suspended loan repayments for affected borrowers. The CBN's first quarter report highlighted this trend, underscoring the impact of the forbearance withdrawal on the banking sector.

The CBN's prudential benchmark serves as a guideline for banks to maintain a healthy loan portfolio. An NPLs ratio above 5.0 per cent indicates that a significant proportion of loans are not being repaid, posing a risk to the bank's financial stability. The withdrawal of forbearance measures has exposed these underlying issues, forcing banks to confront the reality of their loan portfolios. This development is particularly noteworthy given the CBN's efforts to maintain a stable banking sector during the pandemic. By withdrawing the forbearance measures, the CBN has effectively shifted the responsibility for managing non-performing loans back to the banks.

The increase in NPLs ratio has significant implications for both banks and their customers. For banks, this means a higher risk of loan defaults, which can lead to financial losses and potential regulatory exposure. For customers, it may result in reduced access to credit or increased interest rates on existing loans. Lawyers advising clients on loan restructuring should take note of the increased risk of non-performing loans and potential regulatory exposure following the withdrawal of COVID-19 forbearance. As the banking sector navigates this new reality, careful consideration must be given to the implications of the CBN's decision.

Lawyers advising clients on loan restructuring should note the increased risk of non-performing loans and potential regulatory exposure following the withdrawal of COVID-19 forbearance.

Source: Original reporting via Vanguard News