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]
Nigeria Deposit Insurance Corporation (NDIC), acting as liquidator of the defunct Gulf Bank Plc., has instituted two separate actions at the Federal High Court in Lagos against Wema Bank Plc.
The combined claims amount to approximately N125,384,535,500, arising from two distinct sets of disputed high-value properties in Banana Island, Lagos, alongside an alleged improper cash transaction of N401 million.
Both suits were filed under the Failed Banks (Recovery of Debts and Financial Malpractices in Banks) Act and form part of NDIC’s long-running efforts to recover and liquidate outstanding assets of the defunct Gulf Bank nearly two decades after its collapse.
The two actions, though related, concern distinct sets of six properties each, acquired through different shell companies allegedly used by the defunct bank.
The first suit concerns six properties in Banana Island purchased in the name of Euston Wenberg Engineering Company Limited, described in the pleadings as a shell company used by Gulf Bank.
These plots situate in Zones J, K, L and P, have a combined area of approximately 13,794.145 square metres.
At the prevailing market rate of N4,500,000 per square metre, NDIC values these properties at N62,073,652,500.
The second suit concerns a separate set of six properties in Banana Island acquired through Bacad Finance and Investment Limited (later renamed Supra Commercials Limited), another entity in which the defunct bank held over 80 per cent shareholding.
These plots have a combined area of approximately 13,979.974 square metres, valued at N62,909,883,000 at the same per-square-metre rate.
In addition, the second suit claims recovery of N401,000,000 allegedly collected by Wema Bank from the NDIC’s agent bank, United Bank for Africa (UBA), in September 2009.
The Governor of the Central Bank of Nigeria revoked Gulf Bank Plc’s banking licence by notice published in the Official Gazette of the Federal Republic of Nigeria (Volume 93, Number 3, Government Notice No. 7) dated January 16, 2006, and the Federal High Court, Lagos Division, subsequently made a winding-up order on November 27, 2006, appointing NDIC as liquidator.
On the basis of those instruments, the Corporation maintains it is legally mandated to trace, recover, and liquidate all outstanding assets of the defunct bank for the benefit of depositors and creditors.
In the first suit, NDIC alleged that Gulf Bank acquired six Banana Island plots between 1998 and 2003 using Euston Wenberg Engineering Company Limited as a vehicle.
The internal records of the defunct bank reportedly treated the acquisition as a loan account, an arrangement NDIC contended shows the assets remain beneficially owned by Gulf Bank.
NDIC further alleged that Wema Bank took custody of these properties purportedly to secure an interbank deposit of N771.79 million, but that a joint CBN/NDIC special examination conducted in September 2005 found no record in Gulf Bank’s books confirming that any such deposit existed.
The examination report, dated September 30, 2005, found the defunct bank’s explanations unsatisfactory and no supporting documentation was subsequently produced.
According to NDIC, Wema Bank later presented two managers’ cheques from Access Bank and Intercontinental Bank, both dated September 2005 totaling N250 million in favour of Euston Wenberg Engineering Limited, which NDIC framed as instruments for a purchase rather than a recovery of a deposit.
NDIC contended that the purported sale at N250 million was commercially implausible, given that a single property in Banana Island at that time was worth in excess of N500 million.
In the second suit, NDIC also alleged that Gulf Bank injected N20 million into Bacad Finance and Investment Limited in 2001 to increase its share capital, and later invested a further N60 million in the company in 2003.
The defunct bank ultimately held over 80 per cent of Bacad Finance’s shares and used the entity to acquire a second set of six Banana Island plots.
The pleadings record that the defunct bank intended to develop the properties as a luxury residential estate of 72 flats, to be called Bacad Estate, in partnership with Shelter Afrique.
NDIC alleged that Wema Bank, without any valid mortgage, court order, or proprietary interest, took custody of these properties and later claimed to have sold them for N524 million by way of managers’ cheques dated 2006 and 2007.
NDIC described this claimed sale price as grossly implausible given that each property was worth over N4 billion by that period.
Separately, NDIC stated that in June 2009 it wrote to Wema Bank approving payment of N1,635,616.44 as the full outstanding deposit due to the bank as at January 16, 2006, the date Gulf Bank went into liquidation.
Notwithstanding that communication, NDIC alleged that in September 2009 Wema Bank collected N401 million from UBA, NDIC’s agent bank, without lawful justification, and that the Corporation has no record showing Wema Bank was owed any sum beyond the approved N1.635 million.
Wema Bank, through its counsel, Dr Oladapo Olanipekun (SAN), Mr Kehinde Ogunwunmiju (SAN) and Mr Tunde Afe-Babalola (SAN) have filed a preliminary objection challenging the court’s jurisdiction.
The bank relies on the Failed Banks Act, the Companies and Allied Matters Act (CAMA) 2020, the Limitation Law of Lagos State, and Sections 6(6) and 251(1) of the 1999 Constitution.
Wema Bank argued that NDIC’s claims do not arise from any loan, credit facility, guarantee or banking transaction between the parties, as required under the Failed Banks Act, and that the bank was never a customer of Gulf Bank in respect of any credit facility.
The bank further contended that the suits disclose no debtor-creditor relationship and that NDIC lacks locus standi because the disputed properties were allegedly owned by Bacad Finance and Investment Limited (now Supra Commercials Limited), a separate legal entity.
According to Wema Bank, the matter is fundamentally one of property ownership rather than banking debt recovery, placing it outside the Federal High Court’s jurisdiction under Section 251(1) of the Constitution.
The bank also argued that any cause of action, if it existed at all, arose between 2006 and 2007 and is now statute-barred under the Limitation Law of Lagos State, and accuses NDIC of abusing court process by attempting to circumvent limitation laws with a stale claim.
Wema Bank is asking the court to strike out or dismiss both suits.
The matters have been adjourned to June 25, 2026 for further proceedings.
OneWallet microfinance Bank is partnering Zenith bank and MTN to build a platform that will provide digital financial services to support the growth of Small and Medium Scale Enterprises (SMEs) businesses in Abia State.
Dr. C Darl Uzu, Chairman of OneWallet, who disclosed this while launching the platform for traders at the Ariaria International Market, Aba, Abia State said it was meant majorly for traders and the SMEs because they are the bedrock of the Nigerian economy.
According to Dr. Uzu, “We want to expand the inclusion of small businesses in digital financial services by making it easy for them to make and receive payments on affordable digital devices, hence the UnionBell Smart phones and POS.
“We want to help SMEs to access financial support and loan easily to grow their business, and also help businesses to build the history and credibility they require for future growth and expansion.”
He said OneWallet was not created just as a payment application, but as a business support platform designed around the real needs of SMEs.
Dr. Uzu said the choice of Ariaria International Market as the pilot for the platform was intentional since the market is one of the strongest symbol of enterprise in Nigeria.
“We are not here however to teach Ariaria people how to trade because Ariaria already understands business, but we are hear to support Ariaria business energy with tools that can help businesses do more, reach more customers, organize better and prepare for bigger opportunities; we are here to help Ariaria innovate and grow.”
He thanked MTN, Zenith bank and the leadership of the traders for partnering OneWallet to provide the platform that help businesses to expand.
A representative of MTN at the launch, Dr. Ernest Chieke described OneWallet as a platform for individuals and SMEs which intend to move their businesses forward.
He expressed joy that his firm was partnering OneWallet to bring solution to SMEs’ financial problems.
Carl Akwarandu who represented Zenith bank at the event said the bank decided to partner OneWallet because it has a unique product that will make small businesses grow faster.
He promised that Zenith bank would give OneWallet all the support it needs to make it number one microfinance bank in the country.
The Director of OneWallet, Dr. David Nwosu described the microfinance bank a one stop-touch for SMEs growth.
He said at OneWallet, collateral are not needed to obtain loan, but the individual’s business history.
A member of the board of the microfinance bank, Wiedong Wang, commended Dr. Uzu for establishing OneWallet.
He expressed optimism that with the help of its partners, OneWallet will excel.
Central Bank of Nigeria (CBN) has warned non-interest financial institutions against governance and compliance risks capable of undermining public confidence and financial stability in the country’s growing Islamic finance sector.
Interest-free banks, often known as non-interest or Islamic banks, operate without charging or paying traditional interest (Riba).
The warning was contained in a press statement issued by the apex bank following the 2nd Annual Interactive Session between the CBN Financial Regulation Advisory Council of Experts and the Advisory Committees of Experts of Non-Interest Financial Institutions held at the CBN Auditorium in Abuja.
Speaking through Dr Rita Sike, director of the Financial Policy and Regulation Department, Philip Ikeazor, deputy governor, Financial System Stability, said the rapid expansion of the industry had increased exposure to operational and regulatory vulnerabilities.
The statement read, “The Deputy Governor, however, observed that as the industry grows in size, sophistication, and interconnectedness, it faces unique risks, particularly non-compliance risk, governance challenges, operational vulnerabilities, and emerging technological risks.
“He warned that such risks, if not properly managed, could undermine public confidence, financial stability, and the overall credibility of the non-interest finance ecosystem.”
According to the CBN, the engagement was part of ongoing efforts to strengthen Shariah governance, improve regulatory clarity, and reinforce risk management standards within the non-interest financial services industry.
The apex bank noted that non-interest financial institutions continued to play an increasingly important role in Nigeria’s financial system by providing ethical and Shariah-compliant alternatives to conventional banking.
It stated that the institutions were also contributing to financial inclusion, real sector financing, micro, small, and medium enterprises development, and shared prosperity.
The CBN further explained that the establishment of FRACE and the mandatory constitution of ACEs across all non-interest financial institutions were designed to institutionalise a harmonised governance framework for the sector.
According to the statement, sustained interaction between FRACE and ACEs remained critical to ensuring that regulatory expectations were properly understood and consistently implemented across the industry.
“The objectives of today’s session include fostering the institutionalisation and effective operation of a robust Shariah governance system within Non-Interest Financial Institutions, and providing a structured platform for dialogue, knowledge-sharing, and collaboration,” Ikeazor was quoted in the statement.
In his remarks, Prof Bashir Umar, deputy chairman of FRACE, said the interactive session was aimed at strengthening governance within the non-interest finance sub-sector and promoting constructive engagement between regulators and industry advisory committees.
He also commended the management of the CBN for reviving the session, which was first introduced in 2014.
Earlier in her welcome remarks, Sike reaffirmed the apex bank’s commitment to building a strong and well-governed non-interest financial services industry.
She noted that the growing diversity of products and delivery channels, particularly the emergence of Islamic fintech, had increased the need for stronger regulatory oversight and continuous engagement among industry stakeholders.
“The growing diversity of products, institutions, and delivery channels, particularly with the emergence of Islamic fintech, underscores the need for continuous dialogue, sound regulatory oversight, and robust advisory input from scholars and practitioners,” she said.
The session featured technical presentations on Shariah non-compliance risks in non-interest banks and the role of Islamic fintech in driving financial inclusion.
Participants at the event included members of FRACE, chairmen and members of various ACEs, managing directors of non-interest banks, senior CBN officials, and representatives of the Bank of Industry and the Securities and Exchange Commission.
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