Banks’ Bad Loans Spike After CBN Withdraws Regulatory Forbearance
Nigerian banks record a spike in bad loans after the CBN withdraws regulatory forbearance, exposing previously restructured debts and impacting earnings.
Non-performing loans (NPLs) across Nigerian banks have risen following the Central Bank of Nigeria’s (CBN) decision to withdraw regulatory forbearance, according to recent industry disclosures.
The withdrawal means banks can no longer temporarily reclassify or restructure certain stressed loans without fully recognizing them as impaired. As a result, several lenders have recorded higher bad loan ratios as previously shielded exposures are now reflected on their balance sheets.
Financial analysts say the move is aimed at improving transparency and strengthening the banking system over the long term, even though it may pressure short-term earnings. With forbearance lifted, banks are expected to make higher loan-loss provisions, which could affect profitability and capital buffers.
The CBN has maintained that the policy shift will encourage better risk management and ensure that banks accurately price credit risk. Market watchers also expect lenders to tighten lending standards, focus more on recoveries, and rebalance portfolios toward lower-risk assets.
While the development has raised concerns among investors, experts note that a clearer picture of asset quality could restore confidence and support a healthier financial system in the medium to long term.
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