E-Financial
Banks’ N1.96Trn Black Hole: Who Took the Loans, Who Defaulted, and Why the Real Economy Suffers
By Blaise Udunze
Nigeria’s banking sector has entered a season of reckoning. Eight of the nation’s biggest banks have collectively booked N1.96 trillion in impairment charges in just the first nine months of 2025 which represents a staggering 49 percent increase from the N1.32 trillion recorded in the same period of 2024.
Behind these figures lies a deeper question that speaks to the very soul of Nigerian finance on who received these loans that have now turned sour? Were they the small and medium enterprises (SMEs), entrepreneurs, and job creators that fuel real economic growth, or were they politically connected insiders and corporate giants whose failures are now being quietly written off at the expense of the public trust?
The Central Bank of Nigeria (CBN) is unwinding its pandemic-era forbearance regime, a policy that allowed banks to restructure non-performing loans and delay recognizing potential losses. It was a relief measure meant to protect the economy during the COVID-19 shock. But as the CBN begins to phase out this regulatory cushion, the hidden weaknesses in many banks’ balance sheets are now coming to light.
The apex bank has since placed several lenders under close supervisory engagement, restricting them from paying dividends, issuing executive bonuses, or expanding offshore operations until they meet prudential standards. Those that have satisfied the conditions are being gradually transitioned out ahead of the full forbearance unwind scheduled for March 2026. This shift, though painful, is forcing banks to confront the true state of their loan books and the picture emerging is anything but flattering.
A review of financial statements of Nigeria’s top listed banks reveals the distribution of impairment charges as of the third quarter of 2025.
– Zenith Bank Plc leads the pack with an eye-popping N781.5 billion in impairments, a 63.6 percent jump from N477.8 billion in 2024. Most of this amount to about N711 billion which occurred in the second quarter of 2025, driven by losses on foreign-currency loans and the end of regulatory forbearance. The bank’s gross loans declined by 9 percent to N10 trillion, and though its non-performing loan (NPL) ratio improved to 3 percent, that was largely due to massive write-offs.
– Ecobank Transnational Incorporated (ETI) followed closely, provisioning N393.7 billion, up 47 percent year-on-year. Inflation, exchange-rate volatility, and macroeconomic stress in Nigeria and Ghana all contributed to loan-quality deterioration. Its total loan book stands at N21.1 trillion, with a modestly improved NPL ratio of 5.3 percent.
– Access Holdings Plc posted impairments of N350 billion, representing a 141.5 percent surge year-on-year. About N255 billion of this came from loans to corporate entities and organizations, while the rest were loans to individuals. The bank cited changing macroeconomic conditions, inflationary pressures, and continued regulatory adjustments as the main culprits.
– First HoldCo reported N288.9 billion, up 68.6 percent from N171.4 billion a year earlier. The bank attributed the spike to revaluation losses and write-downs of legacy exposures in the energy and trade sectors. Notably, about N100 billions of this was incurred in the third quarter alone.
– United Bank for Africa (UBA) saw a dramatic improvement, cutting impairments from N123.5 billion to 56.9 billion, thanks to recoveries of N50.4 billion. The bank’s proactive loan-book management and collateral recoveries were credited for this performance.
– Guaranty Trust Holding Company (GTCO) posted N69.8 billion, up slightly from N63.6 billion last year. The group wrote off a key oil-and-gas exposure but maintained strong profitability, with pre-tax return on equity (ROAE) of 39.5 percent.
– Stanbic IBTC Holdings Plc recorded N11.6 billion, a sharp 80 percent decline year-on-year following recoveries of N16.3 billion on previously impaired loans.
– Wema Bank Plc, with N11 billion in impairments, reported one of the lowest provisioning levels in the industry, despite 30 percent loan growth.
Altogether, these eight banks have set aside almost N2trillion in provisions to cover potential losses, a sum roughly equivalent to Nigeria’s entire federal capital expenditure for 2025.
There have been recent claims of a modest level of loan growth that is not commensurate with the overall expansion of the banking system’s balance sheet. Data from MoneyCentral shows that the combined total loans of the nine banks stood at N65.37 trillion as of September 2025, representing a 7.42 percent increase from N60.86 trillion in 2024. This contrasts sharply with a 52.63 percent surge in combined loans recorded in the 2024 financial year and a 32.64 percent increase in 2023, according to data gathered by MoneyCentral.
The underlying question, therefore, is which sectors of the economy are actually benefiting from this reported loan growth?
The real puzzle behind these numbers is who actually received these loans that are now being impaired. While banks have long positioned themselves as engines of private-sector growth, evidence suggests that much of their lending goes to a narrow base of corporate borrowers, politically connected elites, and oil-and-gas companies. These sectors offer large-ticket deals and quick interest earnings but also carry enormous risk.
In contrast, the SME sector, which employs more than 80 percent of Nigeria’s workforce, continues to face credit starvation. Many small businesses are forced to rely on expensive informal loans or personal savings because banks deem them too risky. The pattern is clear that banks chase safety and short-term profits over inclusive growth. When their big corporate bets fail, they write them off through impairment charges, but the cumulative effect is that real economic activity suffers while the credit system grows more fragile.
Another dimension to the problem is the banking industry’s heavy investment in government securities. Over the past two years, Nigerian banks have channeled N20.4 trillion into treasury bills, bonds, and other fixed-income instruments, reaping risk-free returns rather than funding productive ventures. This “securities trap” is profitable for banks but disastrous for the economy. Instead of financing factories, farmers, or tech innovators, banks earn easy money by lending to government thereby crowding out private investment and weakening the transmission of credit to the real sector. When interest rates rise or currency values swing, the market value of these securities falls, forcing banks to record mark-to-market losses that translate into impairment charges. Thus, the same safety net that shields banks from loan risk ends up creating financial volatility of its own.
Beyond macroeconomic challenges, Nigeria’s banks are also grappling with homegrown problems like insider abuses, weak corporate governance, and ineffective risk management. Past crises in the banking sector, from the 2009 consolidation fallout to the 2016 oil-sector shock, reveal a consistent pattern: directors and senior executives often have outsized influence over loan approvals, sometimes extending credit to themselves or politically exposed entities without proper collateral or due diligence. These insider-related loans frequently turn toxic, hidden under layers of restructuring and accounting manoeuvres until a regulatory audit forces exposure.
The recent impairments may well reflect a new cycle of these historical sins as loans extended under pressure, influence, or misplaced optimism, now coming home to roost as the CBN tightens oversight. Corporate-governance codes exist, but enforcement remains uneven. Some banks continue to operate “relationship banking,” were loyalty trumps prudence. The lack of whistleblower protection, combined with weak internal-audit independence, further compounds the problem. Until boards and regulators impose real consequences for reckless lending, the system will continue rewarding the wrong behaviour and punishing taxpayers and shareholders in the long run.
At its heart, impairment is a measure of how well banks anticipate and manage risk. A rise in impairments signals that too many loans were made without properly assessing the borrower’s ability to repay, or that risk models failed to adjust to changing macroeconomic conditions. Several banks blamed their losses on exchange-rate volatility and inflation, but these are hardly new risks in Nigeria’s economic environment. The fact that impairments ballooned even as profits remained high suggests that risk-management frameworks were reactive rather than preventive which focused on compliance rather than foresight. In some cases, the sheer scale of provisioning, such as Zenith’s N781 billion or Access’s N350 billion, points to systemic underestimation of credit risk.
Every naira written off as an impairment represents not just a failed loan but a lost opportunity for the real economy. N1.96 trillion could have funded tens of thousands of new small businesses, millions of jobs, and critical infrastructure projects. Instead, these funds are trapped in the closed circuit of banking losses or vanish into opaque corporate failures. This has broader implications: as banks absorb losses, they tighten lending criteria, making it harder for genuine borrowers to access loans. High impairments signal instability, discouraging foreign investors and depositors, while credit flow dries up, productivity and job creation suffer. The result is a paradoxical economy where banks post impressive profits yet the productive sector languishes.
If there is a silver lining, it is that some banks, notably UBA, Stanbic IBTC, and Wema Bank are demonstrating improved loan-recovery strategies, more disciplined credit models, and a stronger focus on risk-weighted assets. Their experiences prove that impairment is not inevitable; it is the outcome of choices like governance, culture, and accountability. For others, the current round of provisioning should serve as a wake-up call to rethink their business models, diversify exposures, and strengthen compliance culture.
To its credit, the CBN’s forbearance unwind is a critical step toward transparency. By compelling banks to recognize their true loan losses and restricting dividend payouts until they meet prudential standards, the regulator is forcing a long-overdue cleansing of the system. However, reform must go deeper than technical compliance. The CBN must enforce public disclosure of insider-related loans, tighten penalties for concealment, and promote lending to productive sectors through targeted incentives. For instance, a tiered capital framework could reward banks that extend a higher proportion of credit to SMEs and manufacturing, while imposing stricter capital charges on speculative or insider-related lending.
Nigeria’s banking sector has shown resilience through crises, from the global financial meltdown to oil-price collapses. But resilience should not become an excuse for complacency. The N1.96 trillion impairment charges of 2025 are more than a balance-sheet adjustment; they are a mirror reflecting structural flaws in lending culture, governance, and the alignment between finance and development. To rebuild trust and relevance, banks must reorient lending toward real-sector growth, invest in credit analytics and risk intelligence that anticipate shocks, enforce transparency in board-level loan approvals and insider exposures, and collaborate with regulators to design sustainable credit frameworks for SMEs. Above all, there must be a moral recalibration of banking purpose from chasing short-term profits to fueling long-term national prosperity.
The spike in impairment charges does not mean Nigeria’s banks are collapsing. Rather, it signals an industry confronting its hidden fragilities. As the forbearance curtain lifts, the system has a chance to reset to clean up bad debts, rebuild credibility, and reconnect finance with development. But that opportunity will be wasted if the same patterns persist: insider lending, governance lapses, and a preference for easy returns over real investment. Until these issues are confronted head-on, the question will continue to echo through boardrooms and regulatory halls are Nigerian banks truly financing growth or merely recycling risk and protecting privilege? Only transparency, discipline, and a renewed sense of purpose can answer that question in the affirmative.
Blaise, a journalist and PR professional writes from Lagos, can be reached via: [email protected]
Corporate Affairs Commission (CAC) has announced that all unregistered Point-of-Sale (PoS) operators across Nigeria will be shut down effective Jan. 1, 2026.
PoS
In a statement issued on Saturday, the Commission described the proliferation of unregistered PoS terminals as a “reckless practice” that violates the Companies and Allied Matters Act (CAMA) 2020 and the Central Bank of Nigeria (CBN) agent banking regulations.
According to the CAC, security agencies will enforce compliance nationwide, while unregistered PoS terminals will be seized or shut down.
The Commission further disclosed that financial technology (fintech) firms enabling illegal transactions are now under strict surveillance, with violators to be placed on a watchlist and reported to the CBN.
“The CAC has observed the rising number of PoS operators running without registration, violating CAMA 2020 and CBN Agent Banking Regulations.
“This reckless practice, often enabled by some fintech companies, puts Nigeria’s financial system and citizens’ investments at risk. This must stop,” the statement read.
It advised all operators to begin the registration process immediately, stressing that compliance is compulsory.
The Commission warned that the proliferation of unregistered PoS operators exposes Nigeria’s financial system and citizens’ funds to significant risks, adding that the new directive is aimed at safeguarding financial integrity and consumer protection.
Nigeria CommnicationsWeek reports that the CAC concluded its statement with a firm reminder: “Compliance is mandatory.”
Access Bank Plc has been awarded the prestigious Financial Inclusion Impact Award (Unified) at Nexus 2025, Qore’s flagship customer experience and financial infrastructure summit, in recognition of its groundbreaking digital innovations that have expanded financial access to millions across Africa.
The annual Nexus event, widely regarded as a leading platform for showcasing transformative financial technology on the continent, celebrated institutions driving measurable impact through digital transformation.
Access Bank stood out for its suite of innovative digital banking platforms that have successfully reached underserved communities, enabling financial participation for individuals and small businesses previously excluded from traditional banking services.
This latest accolade adds to Access Bank’s growing list of Nexus honors, having previously secured the Purpose Award in 2023 and the Best Commercial Bank in Technology Adoption Across Africa in 2024.
Speaking on the recognition, Ms. Chizoba Iheme, group head DSA and Beta Proposition, said, “We are truly honored to receive the Nexus Award for Financial Inclusion Impact (Unified). This recognition reinforces Access Bank’s long-standing commitment to breaking barriers and expanding financial access for individuals and businesses across Nigeria and beyond.
“At Access Bank, financial inclusion is more than a mandate, as it is a responsibility we proudly uphold as we continue to design innovative solutions that empower underserved communities. This award strengthens our resolve to keep driving sustainable impact and to ensure that no one is left behind in the financial ecosystem.”
Emeka Emetarom, chief executive officer of Qore, said, “At Qore, we are proud to power the infrastructure that enables real, scalable financial inclusion across Africa. Our partnership with Access Bank continues to demonstrate what is possible when bold vision, technology, and flawless execution come together.”
The recent event, hosted by Qore, brought together stakeholders across the financial services ecosystem, including commercial banks, microfinance banks, fintech companies, regulatory bodies, and government officials. Nexus 2025 provided a platform for industry leaders to discuss building the rails for Africa’s credit revolution and the critical role seamless digital banking must play in shaping this future.
By Blaise Udunze
On December 2, 2025, the Central Bank of Nigeria (CBN) announced a policy that significantly departs from the cash-restriction measures Nigerians have faced lately. The apex bank abolished restrictions on cash deposits. Increased the weekly cash withdrawal limits to N500,000 for individuals and N5 million for corporates while substituting the earlier monthly limits of N5 million and N10 million respectively. These modifications, which will be effective from January 1, 2026, represent what the CBN describes as the necessity to “streamline provisions to reflect present-day realities.”
CBN
Authorized by the Director of Financial Policy & Regulation, Dr. Rita I. Sike, the policy overhaul aims to lower cash-management expenses, improve security, and lessen money-laundering threats related to Nigeria’s significant dependence on physical cash. Daily ATM withdrawal limits stay fixed at N100,000 and count toward the total cap. Withdrawals exceeding the limits incur charges of three percent for individuals and five percent for companies, with the revenues divided: 40 percent to the CBN and 60 percent to the banks.
This update comes three years following the disputed 2022-2023 cash redesign crisis at a time characterized by extreme cash deficits, extended lines at banks, and devastating impacts on the informal economy. Consequently, the newest order generates responses: praise from individuals who consider it delayed aid, disapproval from those perceiving it as a bewildering backtrack, and concern from those apprehensive about potential enduring hazards.
Experts Applaud a More Realistic Modification
For economists, in a publication by Nairametrics showed that the action taken by the CBN signifies much-needed practicality. Dr. Salisu Ahmed, an economist based in Abuja, refers to the updated limits as “a step,” praising the CBN for gaining a clearer insight into “cash management practices in a predominantly informal economy.”
He stated that the changes will alleviate the difficulties faced by families and small enterprises due to restrictions. Rigid withdrawal caps had limited transactions, made small-scale commerce more difficult, and caused numerous businesses to experience cash-flow problems. “This adjustment signifies a response from the CBN recognizing the challenges Nigerians face daily and easing rules that previously hindered commerce and individual management,” he clarified.
Banking analyst, David Omale, echoes this view, seeing the CBN’s action as a sign of responsiveness. He points out that higher limits could “enhance liquidity for firms facing challenges from inflation, supply-chain issues and unpredictable cash flows.”
In an economy in which over 60 percent of trade is informal and where the adoption of digital payments varies across different socio-economic groups, experts suggest the updated limits correspond more accurately to real-world conditions. These limits offer businesses flexibility to reinstate transactional liberty and may help recover public confidence diminished by previous cash shortages.
Critics Caution About Continuing Disparities and New Threats
However, the praise is not universally shared. Numerous specialists and industry participants contend that the modifications, although appreciated, are inadequate or might even be detrimental.
Financial strategist Nnenna Okafor contends that the updated limits are insufficient for traders and micro-businesses that depend largely on cash to sustain their operations amid challenges. Due to increasing product prices, logistical difficulties, and unreliable digital banking services in regions, she asserts that numerous Nigerians will still need more liquidity than the new thresholds to stay viable.
Within PoS operators’ players, in Nigeria’s payment system, the response is notably divided.
PoS Operators Split
Certain PoS agents appreciate the modifications, anticipating that they will:
– Reduce friction with banks over “flagged” transactions
– Facilitate processes for clients requiring withdrawals
– Rebuild trust after months of cash shortages
Others convey concern. A PoS operator in Lagos cautions that greater cash availability could hinder the adoption of payments. “While easier access to cash can address problems, it may also decrease dependence on PoS terminals and other digital payment solutions that provide long-term security and efficiency,” she remarked.
She argues that if the CBN does not combine the policy with targeted incentives to encourage payment uptake, Nigeria runs the risk of regressing into deep-rooted reliance on cash.
Another operator in Abuja points out a different issue that has to do with unstable cash supply at numerous commercial banks. He insists that simply boosting withdrawal limits does not automatically fix supply shortages. “If banks cannot consistently provide cash, raising limits fails to solve the issue,” he stated.
Other operators also caution that the new setting might push fintech firms out of the market, which possibly allows monopolies to form since only big payment firms can endure the transition back to increased cash usage.
Experts in Security Alert to Increasing Threats, from Crime
Apart from operational issues, security experts have expressed concerns about the dangers linked to greater cash flow.
Abas Ogendengbe, a security expert at Anold Consulting Ltd., warns that increased access to amounts without strict controls “opens up risks for theft, fraud and money laundering.” He contends that without improvements in surveillance transaction tracking and reporting frameworks by banks, criminal groups might take advantage of the restrictions.
Nigeria continues to confront:
– High rates of petty theft
– Organised criminal cash-for-goods networks
– Ransom-based criminality
– Fraudulent cash-flow manipulation
He contends that a policy boosting the amount of currency in circulation should consequently be accompanied by enhanced institutional protections, rather than diminished ones.
Advantages of the New Policy: Relief, Liquidity, and Business Freedom
Although it has faced criticism, the CBN’s decision carries benefits:
1. Increased Liquidity for the Informal Sector
Small-scale merchants, farm producers, haulers, craftsmen, and market participants relying significantly on cash will experience ease in transferring money, purchasing stock, and expanding their businesses.
2. Reduced Transaction Friction
Companies that once faced limiting restrictions now recover agility, enhancing business continuity and lowering administrative challenges.
3. Restoration of Public Trust
After the trauma of the cash scarcity era, easing restrictions may slowly rebuild confidence in the banking system and encourage more people to save and transact through formal channels.
4. Policy Simplicity
The updated limits, while still restricted, are more straightforward and less administrative compared to the special-authorization system.
The Disadvantages: Policy Volatility, Inflationary Risks, and Stunted Digitalisation
Nonetheless, the policy change is also accompanied by drawbacks:
1. Weakening of Monetary Policy Credibility
Regular significant reversals indicate instability and undermine confidence. A central bank needs to be consistent and foreseeable; Nigeria’s policy environment has shifted in the contrary.
2. Potential for More Money Laundering
Unlimited cash deposits and increased withdrawal limits are inconsistent with standards for preventing illegal financial transactions.
3. Undermining Digital Payment Growth
The increase in fintech was expedited amidst cash availability. A return to reliance on cash might hinder innovation. Dampen the use of safer trackable digital methods.
4. Increased Risk of Robbery and Cash-Based Crime
An increased amount of cash in use results in tangible currency to be stolen additional opportunities for criminals and amplified operational difficulties for the police.
5. Higher Costs of Cash Management
The processes of currency production, circulation, and safeguarding place financial strains on the banking sector and the CBN.
Policy Details and Operational Complexities
The CBN’s circular offers instructions for operations:
– Excess withdrawal charges:
3 percent for individuals
5 percent for corporates
– Revenue sharing:
40 percent to CBN, 60 percent to banks
– Withdrawals from ATMs and PoS terminals contribute to the limit, highlighting the importance for customers to monitor where their withdrawals originate.
– ATMs can now be loaded with all denominations, although third-party cheque cashing is still limited to N100,000.
– Exemptions are maintained for government revenue accounts, microfinance banks, and primary mortgage banks.
– The removal of exemptions for embassies and donor agencies is a move that some parties consider diplomatically risky.
The CBN frames this policy change as a balance, boosting liquidity while still maintaining the nation’s goal of a cashless economy. Nevertheless, its effectiveness depends on the ability of the government and financial institutions to encourage payments while addressing the security challenges posed by greater cash circulation.
A Relief Today, a Question Mark Tomorrow
The CBN’s updated cash-policy structure provides support for families, small enterprises, and the informal sector. It addresses some of the severe effects of previous policies and shows a readiness, though delayed, to adjust to practical realities.
However, the enduring consequences are complex. The policy creates openings, as money laundering hampers progress in payments, increases security threats, and shows a regulatory environment grappling with achieving stability and trustworthiness.
Nigeria is at an intersection. While cash can relieve hardships, it cannot shape the future economic landscape. The current task is to apply this policy without hindering progress, undermining financial integrity, or jeopardizing monetary stability.
The question of whether this constitutes a liberalisation or an expensive withdrawal will in the end hinge on a single element, the CBN’s ability to pair increased liquidity with stronger oversight, steadfast policy direction, and sustained digital-payment incentives.
Only then can Nigeria avoid sliding backward and instead build a financial system that truly reflects the realities of its people, its economy, and its future.
Blaise, a journalist and PR professional, writes from Lagos, can be reached via: [email protected]
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