Ten commercial banks listed on the Nigerian Exchange (NGX) have reported a total of N3.77 trillion in loan impairment charges from 2023 to the first quarter of 2025. The rising bad loans reflect the ongoing economic difficulties faced by the country’s banking sector.
Loan losses were N1.34 trillion in 2023 and increased to N2.13 trillion in 2024. In the first three months of 2025, impaired loans reached N297.10 billion. This sharp increase shows how hard it has become for borrowers to meet their debt obligations.
Several economic factors have contributed to this trend. The naira’s sharp devaluation in mid-2023 made repaying foreign loans more expensive. High inflation rates and rising interest rates reduced consumer buying power and increased the cost of borrowing. These conditions put pressure on businesses and households, leading to more loan defaults.
Some of the largest Nigerian banks saw the highest levels of loan impairments. First Bank of Nigeria’s losses rose significantly between 2023 and 2024. Zenith Bank and Guaranty Trust Bank also reported increasing bad debts, mainly in their corporate loan portfolios.
Rising bad loans reduce banks’ profits and can limit their ability to offer new loans, which may slow down economic growth. The Central Bank of Nigeria has called on banks to strengthen credit risk management and maintain capital buffers to ensure financial stability.
Banks have responded by tightening their lending standards, restructuring troubled loans, and increasing provisions for loan losses. They are also adopting digital technologies to better assess risks and improve loan recovery efforts.
Experts warn that if Nigeria’s economic challenges persist, the level of bad loans could rise further. However, if policies succeed in stabilizing the economy, banks may see a reduction in impaired loans and an improvement in lending conditions.