A new Central Bank of Nigeria (CBN) survey has revealed an unexpected trend in the third quarter of 2025: banks experienced higher default rates on secured loans (those backed by collateral such as property or vehicles), while defaults on unsecured lending, including personal loans and credit cards, actually declined.
The findings, contained in the CBN’s latest Credit Conditions Survey released on Wednesday, paint a mixed picture of the banking sector’s health amid persistent high interest rates and a challenging economic environment.
According to the report, lenders recorded a noticeable uptick in repayment failures on secured credit facilities between July and September 2025, even as they reported greater willingness to extend new loans across all categories.
“Banks cited improved economic outlook as the primary driver behind increased availability of secured and corporate credit, while a shift in risk appetite was the key factor for greater supply of unsecured loans,” the survey stated.
Notably, the proportion of approved loan applications rose during the quarter for secured, unsecured, and corporate borrowing, signalling that banks opened the credit taps more freely than in the preceding three months.
Corporate borrowers, particularly small and medium-sized businesses, large private non-financial corporations, and other financial institutions, all benefited from lower default rates in the period.
On pricing, the gap between lending rates and the Monetary Policy Rate (MPR) widened slightly for household borrowing: secured loans to individuals became marginally more expensive relative to MPR (-0.1 index points), while unsecured consumer loans saw a larger widening (-1.8 points). In contrast, medium-sized companies and other financial corporations enjoyed narrower spreads of 2.6 and 14.4 index points respectively.
Analysts say the surge in secured-loan defaults may reflect growing distress among borrowers who pledged assets during earlier, lower-rate periods and are now struggling with sharply higher debt-servicing costs following successive MPR hikes.
The contradictory signals — more credit flowing yet rising delinquencies on collateral-backed facilities — underscore the delicate balancing act facing Nigeria’s banking sector as it navigates elevated policy rates aimed at taming inflation while trying to support economic recovery.
