Nigeria’s banking sector expanded credit availability to households and businesses in the fourth quarter of 2025, but lenders faced mounting repayment challenges as default rates climbed across key loan categories, according to the Central Bank of Nigeria’s (CBN) latest Credit Conditions Survey for Q4 2025.
The survey revealed a mixed picture: while overall lending conditions eased in some segments — reflecting cautious optimism among banks — higher borrowing costs for households and increased non-performing loans underscored persistent risks in the financial system.
For household loans, spreads relative to the Monetary Policy Rate (MPR) widened significantly. Secured household loans saw spreads widen by -10.8 index points, and unsecured loans by -2.0 points, meaning consumers paid noticeably higher effective rates. Corporate borrowers experienced more varied outcomes: spreads narrowed (indicating cheaper borrowing) for small businesses (+14.8 points), large private non-financial corporations (+2.9 points), and other financial corporations (+4.3 points), but widened for medium-sized private non-financial corporations (-4.8 points), pointing to tighter pricing in that segment.
Lenders reported rising defaults across secured, unsecured, and corporate portfolios, a trend that signals ongoing repayment stress for both individuals and firms despite the broader improvement in credit supply.
The survey findings align with earlier signs of a credit rebound following the CBN’s monetary policy easing. In September 2025, the Monetary Policy Committee cut the MPR by 50 basis points to 27%, a move aimed at stimulating lending activity. Private sector credit subsequently rose to N74.63 trillion in November 2025, up from N74.41 trillion in October, indicating that the policy shift began to stabilise and modestly expand credit flows.
The CBN attributed the Q4 improvement in credit availability — particularly for secured and corporate loans — to shifting economic expectations, improved liquidity conditions, and banks’ strategic positioning in a post-rate-cut environment. Growth in unsecured lending was linked to adjustments in the cost and availability of funds as well as more positive outlooks among lenders.
However, the survey highlighted the delicate balancing act banks face: supporting economic growth through credit expansion while managing heightened credit risk. Elevated interest rates throughout much of 2025 had constrained household borrowing due to limited disposable income, while corporate lending benefited from targeted liquidity support and policy incentives, especially for large and small enterprises.
The rise in defaults comes after the CBN ended pandemic-era regulatory forbearance, which had previously allowed banks to restructure loans without classifying them as non-performing. With that relief window closed, previously restructured facilities have crystallised into higher non-performing loans (NPLs), pushing the industry NPL ratio above the prudential 5% ceiling to around 7% in recent months.
For Nigeria’s economy, the Q4 trends offer cautious encouragement — credit is becoming more accessible in certain areas — but also serve as a reminder of underlying vulnerabilities. Banks are expanding lending cautiously while tightening risk controls, and borrowers continue to grapple with high borrowing costs and repayment pressures.
As the CBN maintains the MPR at 27% (with adjustments to the interest rate corridor in November), the central bank will be closely watching whether improved credit flows translate into stronger real-economy activity or if rising defaults begin to constrain future lending appetite. The Q4 2025 Credit Conditions Survey paints a picture of a banking sector in transition: more open to credit, but increasingly vigilant about risk.
