E-Financial
Expiry of Loan Forbearance to Test Nigerian Banks’ Capital Buffers- Fitch
Nigerian banks are facing a potential increase in impaired loans and fresh pressure on their capital buffers as regulators prepare to withdraw systemwide forbearance measures that have underpinned the sector since the country’s last major financial shock, according to Fitch Ratings.
The credit rating agency, in a commentary published this week, cautioned that the expiry of forbearance arrangements by the middle of 2025 will trigger the reclassification of large volumes of risky loans, raising impaired loan ratios and testing banks’ ability to maintain adequate capitalisation levels.
The warning comes as Nigerian lenders undergo a complex operating environment marked by high inflation, elevated interest rates, and shifting regulatory demands, even as recent reforms have strengthened earnings and liquidity.
Systemwide forbearance (Regulatory relief measures that allowed banks to avoid classifying certain stressed assets as non-performing), has provided temporary breathing space since the COVID-19 crisis and subsequent naira volatility. Fitch estimates that the vast majority of Nigerian banks will exit these arrangements by the end of 2025.
The agency said the transition will be disruptive, stating: “The expiry of forbearance will lead to some large Stage 2 loans being reclassified as impaired,” it noted. Stage 2 exposures are loans that show signs of significant credit deterioration but are not yet considered in default.
As these migrate into the impaired category, reported non-performing loan (NPL) ratios are expected to rise materially, with knock-on effects for provisioning and capital adequacy. Total capital adequacy ratios (CARs), already stretched for some mid-tier lenders, could come under notable pressure, Fitch said.
Banks that fail to meet prudential thresholds may continue under forbearance but will face penalties, including restrictions on dividend payments, a potential concern for investors in an industry long valued for its high payout ratios.
Despite the looming risks, Fitch emphasised that Nigerian lenders are not entirely unprepared. Many banks have undertaken proactive loan restructurings to improve repayment profiles, while a wave of capital-raising activity has been set in motion by the Central Bank of Nigeria’s (CBN) decision to sharply raise minimum paid-in capital requirements earlier this year.
Improved profitability has also given banks more cushion.
Net interest margins have widened on the back of higher yields, enhancing loss-absorption capacity and providing a buffer against prospective impairment charges.
“This will help counteract increased loan impairment charges and prudential provisions resulting from the expiry of forbearance,” Fitch noted, pointing to stronger earnings as an important offset to asset quality pressures.
One bright spot has been the banking sector’s foreign-currency liquidity profile, which has benefited from the CBN’s exchange rate liberalisation and subsequent naira devaluations.
According to Fitch, the reforms have boosted turnover in the foreign-exchange market and improved banks’ access to hard currency.
This will prove critical as lenders face external debt maturities in the coming years. This is even as Nigerian banks have Eurobonds worth $2.2 billion maturing or callable by 2026.
Fitch said most institutions hold sufficient liquidity to meet these obligations without resorting to refinancing.
This is considered a marked contrast to previous periods when access to international capital markets was limited.
Nonetheless, structural challenges continue to weigh on the industry.
Nigeria’s inflation rate, which has held above 20 per cent for much of the past two years, is eroding real returns and complicating monetary policy transmission. Interest rates are expected to remain high in the near term, further constraining credit expansion.
At the same time, regulatory burdens remain highly onerous, Fitch said, with banks facing compliance demands that add to operating costs and restrict flexibility.
Analysts also warn that sovereign risks including Nigeria’s rising debt stock and fiscal pressures, could spill over into the banking system, particularly given lenders’ large holdings of government securities.
Nigeria Deposit Insurance Corporation (NDIC) has begun paying insured deposits to customers of the 46 recently failed microfinance banks.
Mr Thompson Sunday, managing director and chief executive, NDIC, disclosed this in an interview with the News Agency of Nigeria (NAN) in Abuja.
The interview took place on the sidelines of the International Association of Deposit Insurers Africa Regional Committee meeting.
Sunday said the corporation was using the Nigeria Inter-Bank Settlement System (NIBBS) and customers’ Bank Verification Numbers (BVN) for the payments.
He said the NDIC had traced depositors’ alternative bank accounts and credited them directly without requiring physical visits.
He advised depositors without BVNs to visit the nearest NDIC zonal office for verification and payment processing
“The CBN revoked the licences of the 46 microfinance banks on July 1, 2026,” he said.
He said the NDIC automatically became the provisional liquidator after the revocation, in line with the law.
Sunday said the corporation had commenced payment of the insured maximum deposit of N2 million to eligible customers.
He explained that further payments would depend on the recovery of the failed banks’ assets and outstanding debts.
He said proceeds realised from recoveries would be distributed as liquidation dividends to eligible depositors.
Sunday cited Heritage Bank, Aso Savings and Union Homes as examples of the NDIC’s prompt reimbursement efforts.
He said insured depositors of Heritage Bank were paid within four days of the revocation of its licence.
He added that customers of Aso Savings and Union Homes received payments within 72 hours.
“The law allows us 30 days, but we are working to surpass our previous records,” he said.
The Central Bank of Nigeria (CBN) revoked the banks’ licences for failing to meet regulatory requirements for continued operations.
The apex bank said the action was aimed at protecting depositors, strengthening financial stability and ensuring regulatory compliance.
Mr Taiwo Oyedele, minister of Finance and Coordinating Minister of the Economy, has warned that fear, rumours and misinformation could trigger instability in the banking sector if not properly managed.
Mr Taiwo Oyedele, minister of Finance and Coordinating Minister of the Economy
Oyedele gave the warning in Abuja at the 2026 International Association of Deposit Insurers (IADI) Africa Regional Committee (ARC) Annual Meeting and Workshop, with the theme: “Safeguarding Stability: Public Awareness and Crisis Readiness for a Stronger Future.”
The minister said public confidence remained the foundation of every stable financial system, stressing that panic triggered by false information could create liquidity challenges even for financially sound institutions.
According to him, “there can be no economic growth without financial system stability, and there can be no financial stability without public trust.”
He explained that in the digital age, misinformation could spread rapidly across social media platforms, causing depositors to react out of fear.
“Public trust is fragile. In the digital age, rumours and misinformation can spread across social platforms in seconds, creating liquidity shocks even for solvent institutions,” Oyedele said.
He stressed that building public awareness should not be viewed as a public relations activity, but as a key risk management strategy capable of protecting depositors and strengthening the financial system.
Oyedele noted that deposit insurance had evolved beyond a mechanism for handling bank failures, describing it as a strategic tool for promoting confidence and economic stability.
He said effective crisis preparedness required clear frameworks, communication channels, simulation exercises and coordination among financial sector regulators before emergencies occur.
“Preparedness is not an event, it is a culture,” he said, adding that the strongest crisis response was one that prevented panic from occurring in the first place.
Highlighting Nigeria’s financial sector reforms, the minister said the country’s banking recapitalisation exercise, concluded in March 2026, strengthened the resilience of banks.
He disclosed that 33 out of Nigeria’s 37 banks met the new capital requirements, raising a combined N4.65 trillion in fresh capital, with over 70 per cent sourced from domestic investors.
Oyedele said a better-capitalised banking system would be better positioned to absorb shocks, sustain lending and reduce pressure on the deposit insurance fund.
He also pointed to Nigeria’s removal from the Financial Action Task Force (FATF) grey list in October 2025 as another milestone that strengthened confidence in the country’s financial system.
Also speaking, Mr Olayemi Cardoso, governor, Central Bank of Nigeria (CBN), said public awareness and crisis preparedness were central to maintaining financial stability.
Represented by Solaja Olayemi, director, Other Financial Institutions Supervision Department represented, Cardoso said financial systems globally were undergoing rapid transformation due to technological innovation, digital finance, changing consumer behaviour and increasing market interconnectedness.
According to him, while these developments create opportunities, they also introduce new risks that require stronger cooperation among financial safety-net institutions.
The CBN boss warned that misinformation could spread quickly through digital channels, amplifying depositor reactions and creating potential threats to financial stability.
He added that institutions must continuously strengthen crisis management frameworks, operational resilience and coordination mechanisms to respond effectively to emerging challenges.
The apex bank governor also highlighted the impact of Nigeria’s banking sector recapitalisation policy, saying stronger capital buffers would reduce the likelihood of bank failures and reinforce depositor confidence.
“No single institution can safeguard financial stability in isolation. It is through the coherence and complementarity of this institutional relationship that Nigeria’s financial safety net derives its strength,” he noted.
Earlier, Mr Thompson Sunday, managing director/chief executive officer, Nigeria Deposit Insurance Corporation (NDIC), said confidence remained the most valuable asset in any financial system.
The NDIC boss said trust could take years to build but could be lost quickly if stakeholders perceived uncertainty or instability. He said deposit insurers must ensure that the public understands and trusts existing protection frameworks during both normal periods and times of crisis.
He noted that the 2023 global banking turmoil highlighted the need for institutions to invest in crisis simulation exercises, contingency planning and effective communication strategies.
According to him, the NDIC has continued to strengthen its operational readiness through improved depositor reimbursement systems, public awareness initiatives and enhanced crisis management capabilities.
European Union (EU) has warned the public against a fraudulent document circulating online which falsely claims that the bloc, in collaboration with the World Bank, is offering compensation to individuals whose funds are allegedly trapped in banks and financial institutions across West Africa.
In a statement issued on Wednesday in Abuja, the EU Delegation to Nigeria and ECOWAS described the purported compensation programme as a scam, stressing that neither the European Union nor the World Bank is involved in any such initiative.
The fake document, fraudulently attributed to Thérèse Blanchet, secretary-general of the Council of the European Union, claimed that a special EU-World Bank recovery programme has been established to compensate citizens of Europe and other countries whose legally transferred funds were allegedly withheld by banks in the region.
It also falsely stated that the EU Ambassador to Nigeria and ECOWAS has been mandated to supervise the compensation exercise and directs potential claimants to contact him for processing.
However, the EU categorically dismissed the claims, describing every aspect of the document as fabricated.
“The document in its entirety is a scam. The information and claims contained therein are false. The European Union is neither aware of any such bogus programme nor part of it,” the Delegation stated.
The EU further disclosed that the email addresses and telephone numbers listed in the fraudulent document, purportedly belonging to Ms. Blanchet and Ambassador Gautier Mignot, EU Ambassador to Nigeria and ECOWAS, , are fake and are being used by fraudsters to deceive unsuspecting victims.
The Delegation urged members of the public to ignore the fraudulent claims and avoid engaging with anyone promoting the scheme.
It emphasized that all official announcements from the European Union Delegation to Nigeria and ECOWAS are published exclusively through its official website and verified social media platforms.
The warning comes amid increasing cases of cyber-enabled financial fraud in which criminal syndicates impersonate international organisations, government institutions and senior officials to lure victims into paying fictitious processing fees or divulging sensitive personal and financial information.
The EU reiterated its commitment to combating fraud and misinformation while urging citizens to remain vigilant against scams exploiting the names and identities of reputable international institutions.
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