Nigeria’s banking system recorded a broad-based rise in loan defaults in the final quarter of 2025.
This is according to the Central Bank of Nigeria’s (CBN) Fourth Quarter 2025 Credit Condition Survey Report, released recently.
The report indicated that default balances increased across all major lending categories, underscoring growing repayment stress among households and businesses amid a challenging economic environment.
“Lenders reported higher default rates for Secured, Unsecured, and all Corporate lending types in Q4 2025,” it stated.
The increase in defaults came despite strong growth in credit supply and demand during the quarter.
According to the report, banks expanded lending across secured household loans, unsecured facilities, and corporate credit, driven by shifting macroeconomic expectations and intensified competition within the financial sector.
“Lenders reported increased credit availability for Secured, Unsecured, and Corporate lending in Q4 2025,” it showed.
However, the rise in non-performing exposures suggests that the pace of credit growth may be outstripping borrowers’ repayment capacity.
The CBN report indicated that default pressures were evident across households, small businesses, large corporates, and other financial institutions.
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The defaults were most pronounced among large private non-financial corporations, which recorded a -6.0 index, and other financial corporations at -6.2, signalling mounting stress even among traditionally resilient borrower segments.
It stated that households increased borrowing for mortgages and personal loans, while firms sought credit to finance inventory build-up and capital expenditure.
But corporate demand was strongest for inventory finance, with an index of 26.2, and capital investment at 20.8, suggesting that balance sheets expanded despite ongoing economic uncertainty.
Access to credit, however, became more selective as lenders adjusted to rising default risks. Banks approved a higher proportion of secured household and corporate loan applications, reflecting a preference for collateral-backed exposures.
In contrast, approval rates for unsecured household loans declined, highlighting increased caution toward higher-risk borrowers.
The report showed that households also faced wider interest rate spreads relative to the CBN’s tightening of the Monetary Policy Rate, with spreads for secured and unsecured loans widening to -10.8 and -2.0 index points, respectively.
In the corporate segment, spreads narrowed for small businesses and large corporations, while medium-sized private non-financial corporations recorded a widening spread of -4.8, indicating higher risk premiums for that group.
Notably, the survey showed that default rates rose even as lenders reported an improvement in the average credit quality of newly originated loans, pointing to lingering stress from earlier lending cycles.
While the CBN did not attribute the surge in defaults to a single factor, it pointed to the changing economic environment as a key underlying risk.
As the financial sector enters 2026, the report suggests that rising loan defaults may become a central challenge for banks and regulators alike, testing asset quality, provisioning levels, and the resilience of Nigeria’s credit system.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X
