Nigerian Banks Battle Rising Bad Loans as Borrowing Customers Fail to Repay Credit
- Banks in Nigeria recorded higher loan defaults across households and businesses, despite increased credit supply and rising demand
- Small, medium, and large companies, as well as households and other financial institutions, all saw worsening repayment performance
- Although bad loans have increased, the CBNsaid banks remain stable due to strong liquidity, capital buffers, and ongoing reforms
Legit.ng journalist Victor Enengedi has over a decade's experience covering energy, MSMEs, technology, banking and the economy.
Banks in Nigeria are seeing more borrowers fail to repay their loans, showing increasing pressure in the credit market.
This is happening even though banks are lending more money, and more people and businesses are asking for loans.
Source: UGC
According to the Central Bank of Nigeria’s (CBN) Credit Conditions Survey for the fourth quarter of 2025, default rates increased across all types of loans. These include secured loans, unsecured loans, and loans to businesses.
The report stated:
“Lenders reported higher default rates for Secured, Unsecured, and all Corporate lending types in Q4 2025.”
The survey suggests that many borrowers are struggling to pay back what they owe because of high interest rates, low incomes, and rising business costs.
Defaults on secured loans increased slightly, while unsecured household loans performed worse. Many individuals are finding it hard to repay personal loans, overdrafts, and credit card debts as inflation reduces their spending power.
Businesses are also under pressure
Companies are also facing repayment challenges. Small businesses recorded higher loan defaults as they struggled with high energy costs, weak sales, and limited ability to raise prices.
Medium-sized companies faced similar problems, while large firms were hit harder by foreign exchange swings and rising debt costs.
Other financial institutions also reported more defaults, showing that stress in one part of the system is affecting others. This points to wider financial pressure across the economy.
Despite these challenges, banks said they increased the supply of loans during the quarter. Demand for credit also rose, as many households and businesses borrowed more to manage cash flow problems. However, higher borrowing costs made repayment more difficult.
Bad loans rise, but banks remain stable
The survey also showed that lending rates stayed high, with wider gaps between loan rates and the Monetary Policy Rate. This pushed borrowing costs up and added to repayment problems.
Separately, the CBN reported that bad loans in the banking sector rose in 2025 after the removal of special support measures introduced during the COVID-19 pandemic.
The ratio of non-performing loans climbed to about 7%, above the 5% limit set by regulators. This happened because loans that were earlier restructured under pandemic relief measures are now being counted as bad loans.
Even so, the CBN said Nigeria’s banking system remains stable. Banks have strong liquidity and enough capital to handle shocks. The central bank credited this strength to good interest income, digital improvements, and the ongoing bank recapitalisation programme.
However, the CBN warned that a sharp rise in bad loans could weaken banks and pose risks to the financial system.
Source: UGC
CBN releases banks' interest rates on loans
Meanwhile, Legit.ng earlier reported that the CBN published the latest interest rates charged by Nigerian banks on loans as of January 9, 2026.
The data outlines both the prime and maximum lending rates offered by Deposit Money Banks (DMBs) and merchant banks across the country.
These figures provide insight into current borrowing costs and reflect how banks are pricing credit for different categories of customers.
Source: Legit.ng
