The withdrawal of the Central Bank of Nigeria’s COVID-19 regulatory forbearance has pushed the banking industry’s Non-Performing Loans (NPL) ratio to 9.94 per cent in the first quarter of 2026, well above the CBN’s prudential limit of 5 per cent.
The development was disclosed in the apex bank’s Q1 2026 Economic Report, which linked the increase to the expiration of the pandemic-era relief measures introduced to support borrowers and maintain financial system stability during the COVID-19 crisis.
According to the report, the NPL ratio rose by 2.43 percentage points from 7.51 per cent in the fourth quarter of 2025.
The CBN said the withdrawal of the long-standing COVID-19 forbearance was aimed at improving transparency and accountability in the banking sector, but it also revealed a higher level of impaired loans than previously reflected in banks’ books.
Despite the deterioration in asset quality, the apex bank maintained that the Nigerian banking industry remains generally resilient and stable, with most key financial soundness indicators staying above regulatory requirements.
The sector’s Liquidity Ratio increased to 67.32 per cent in Q1 2026 from 57.22 per cent in Q4 2025, remaining far above the statutory minimum of 30 per cent.
Similarly, the Capital Adequacy Ratio improved to 13.19 per cent from 12.35 per cent, exceeding the regulatory minimum of 10 per cent.
The CBN said the stronger liquidity position indicates that banks still have the capacity to meet short-term obligations while continuing to lend to the economy, while the improved capital position shows that the industry can absorb potential credit and market shocks.
The report noted that the banking sector remained resilient and stable, with most financial soundness indicators within acceptable regulatory thresholds.
Meanwhile, credit extended by Other Depository Corporations (ODCs) rose by 5.95 per cent to ₦60.73 trillion in Q1 2026, up from ₦57.32 trillion in Q4 2025.
The services sector received the largest share of total credit at 59.54 per cent, followed by industry with 34.10 per cent, while agriculture accounted for 6.36 per cent.
However, consumer lending weakened during the period.
The report suggests that although banks remain adequately capitalised and liquid, the removal of COVID-19 forbearance has exposed loans that were previously restructured or distressed, leading to a noticeable decline in asset quality even as lending to key sectors of the economy continues to expand.
