Nigeria’s banking sector experienced a further decline in asset quality in January 2026, with the non-performing loans (NPLs) ratio rising to 8.03%. This increase occurred seven months after the Central Bank of Nigeria (CBN) concluded key regulatory forbearance measures that had permitted banks to restructure troubled loans without immediate classification as impaired.

Data sourced from the CBN’s January 2026 Economic Report indicates that the NPL ratio escalated by 0.52 percentage points from 7.51% recorded in December 2025. This figure significantly exceeds the prudential benchmark of 5.0%.

The rise in NPLs is a direct consequence of loan reclassification following the withdrawal of regulatory forbearance. This withdrawal mandated lenders to recognize previously restructured facilities as non-performing where applicable.

The CBN report stated, “Following the Bank’s loan reclassification after the withdrawal of forbearance, the non‑performing loans (NPLs) ratio rose by 0.52 percentage point to 8.03% compared with the level in the preceding period and was above the 5.00 per cent prudential threshold.”

Despite the increase in non-performing loans, the banking sector demonstrated sustained strong liquidity during the review period. The industry’s liquidity ratio improved to 63.38% in January 2026, an increase from 57.22% in the preceding month. This ratio remains well above the regulatory minimum requirement of 30%.

This improvement suggests that banks maintained adequate liquid assets to meet their short-term obligations and to facilitate financial intermediation activities.

Furthermore, the banking sector’s capital adequacy ratio was reported at 12.05% in January 2026. This is a slight decrease from 12.35% in December 2025 but still surpasses the regulatory minimum requirement of 10%.