Nigeria’s banking industry is showing early signs of pressure following the Central Bank of Nigeria’s decision to withdraw the regulatory forbearance granted to financial institutions earlier in the year.
Fresh figures from the apex bank’s July 2025 economic report revealed that the Capital Adequacy Ratio (CAR) of banks fell to 12 percent, representing a 1.43 percentage point decline from the previous month. The ratio measures a bank’s ability to withstand losses and protect depositors’ funds.
According to the report, the slide was directly linked to the end of temporary relief measures that had helped banks weather the impact of tough economic conditions on their balance sheets.
“The industry’s capital adequacy ratio declined by 1.43 percentage points to 12.00 percent from the level in the preceding month, largely due to the withdrawal of the Bank’s regulatory forbearance in June 2025,” the CBN stated.
While the drop raises concerns about the sector’s buffer strength, the apex bank assured that Nigerian banks remain well-capitalized, stressing that the ratio “remains above the 10.00 percent regulatory threshold,” a level that still reflects “the sector’s sustained ability to absorb credit and market shocks.”
At the same time, the report showed that the Liquidity Ratio (LR) of the banking sector strengthened to 62.86 percent, more than double the required minimum of 30 percent. The CBN attributed this to the banks’ solid short-term solvency and improved capacity to meet obligations.
However, the report flagged a growing concern over Non-Performing Loans (NPLs), which increased to 7.8 percent, surpassing the prudential limit of 5 percent.
“The Non-Performing Loans ratio levitated by 2.17 percentage points to 7.80 percent, above the prudential limit of 5.00 percent. Regardless, overall asset quality remained broadly stable, supported by enhanced supervisory vigilance and risk-based regulatory interventions,” the report said.
Analysts say the end of forbearance marks a return to stricter supervision by the CBN, a move seen as part of broader efforts to restore confidence in the financial system. But some worry that smaller banks may face capital pressure as they adjust to post-forbearance realities.
Despite the emerging concerns, the CBN maintains that the banking sector remains broadly stable, emphasizing that “most key financial soundness indicators stayed within prudential benchmarks.”
