At least 11 commercial banks surpassed the Central Bank of Nigeria’s (CBN) 5 per cent regulatory ceiling for non‑performing loans (NPLs) in April 2025, following industry‑wide loan reclassifications during annual risk reviews, according to Monetary Policy Committee (MPC) member Mustapha Akinwunmi.
“The NPL ratio climbed to 5.62 per cent in April 2025, above the prudential threshold, largely because of loan reclassifications after annual risk assessments,” Akinwunmi stated in a personal note released after the MPC’s 300th meeting in May.
The reclassifications, a regular feature of year‑end credit quality checks, lifted the overall industry NPL above the CBN benchmark. This represented a rise compared to a year earlier, when only six banks breached the limit. The names of the 11 banks involved were not disclosed.
Akinwunmi stressed that the higher ratio reflects a truer picture of credit risk rather than a sudden worsening of asset quality. He suggested the CBN could consider temporary forbearance for sectors heavily exposed to global volatility, including oil and gas.
The breach comes against a backdrop of persistent monetary tightening. The CBN has kept the Monetary Policy Rate at 27.5 per cent since November 2024 after several policy steps to control inflation and steady the naira.
Elevated interest rates have raised borrowing costs and weighed on loan performance in some industries, though the banking sector remains stable with strong capital and liquidity positions.
CBN Deputy Governor for Economic Policy Muhammad Sani Abdullahi confirmed that the rise in NPLs stems from the reclassification exercise and not an underlying decline in loan quality.
“The banking sector remains resilient and continues to support economic activity,” he said.
Latest CBN financial soundness indicators show improvements: the capital adequacy ratio (CAR) increased from 10.81 per cent in April 2024 to 15.55 per cent in April 2025, driven by an ongoing recapitalisation drive.
“Nineteen banks have raised fresh capital, with seven already meeting the new requirements,” Akinwunmi explained, noting that Nigeria’s CAR still trails international standards and further strengthening is necessary.
Liquidity levels also improved, with the system‑wide liquidity ratio rising from 50.6 per cent in January to 55.4 per cent in March. Net interest margin climbed to 67.0 per cent in April, aided by lower operating costs.
Year‑on‑year, total assets increased by ₦30.83 trillion (22.35 per cent), deposits by ₦19.93 trillion (23.58 per cent), and credit to the economy by ₦5.99 trillion (10.89 per cent).
Despite headwinds, banks issued 19,504 new loans valued at ₦417.1 billion between March and April 2025, underlining ongoing credit activity.
To reinforce financial stability, the CBN has instructed banks under regulatory forbearance to suspend dividend payments, executive bonuses and offshore investments.
This directive, aimed at institutions benefiting from temporary relief for credit and Single Obligor Limit breaches, is part of the apex bank’s broader efforts to bolster capital buffers, safeguard balance sheets and promote prudent capital retention across the sector.