Ten commercial banks listed on the Nigerian Exchange (NGX) have collectively incurred N3.77 trillion in loan impairment charges from 2023 to Q1 2025, driven by Nigeria’s volatile macroeconomic environment. The charges, which surged from N1.34 trillion in 2023 to N2.13 trillion in 2024 and reached N297.10 billion in Q1 2025, reflect the impact of naira devaluation, soaring inflation, and elevated interest rates. Despite these challenges, banks are demonstrating resilience through improved risk management and stable asset quality, projecting confidence in navigating the economic storm.
Macroeconomic Pressures Fuel Bad Loans
The spike in loan losses is largely attributed to Nigeria’s economic turbulence, particularly the naira’s sharp devaluation in mid-2023, which weakened corporate and household finances. Inflation, coupled with higher interest rates, increased debt servicing costs, squeezing borrowers’ ability to repay loans. Sectors like oil and gas, general commerce, and consumer goods, which dominate bank loan portfolios, were hit hardest, leading to significant provisioning for bad loans.
Bank-by-Bank Breakdown
- Zenith Bank: Leading with N1.03 trillion in loan losses (N401 billion in 2023, N594 billion in 2024, N36 billion in Q1 2025), Zenith strengthened its defenses with a 223% NPL coverage ratio in 2024, up from 171%. Its cost of risk remained stable at 7.3%, and its NPL ratio rose slightly to 4.7% from 4.4%, reflecting a robust portfolio with 96% of loans in Stage 1 and 2.
- Ecobank Transnational Incorporated (ETI): ETI recorded N869.5 billion in losses (N288.4 billion in 2023, N484.5 billion in 2024, N96.6 billion in Q1 2025), representing 29% of its N2.9 trillion net interest income, a significant drag on earnings.
- First Bank Holdings (First Holdco): With N586.94 billion in impairments (N174.7 billion in 2023, N371 billion in 2024, N41.2 billion in Q1 2025), First Holdco saw its NPL ratio double to 10.2% in 2024 from 4.7%, with its NPL coverage ratio dropping to 51% from 92%, signaling weakened asset quality.
- United Bank for Africa (UBA): UBA reported N423.63 billion in losses (N154 billion in 2023, N258.9 billion in 2024, N11.1 billion in Q1 2025). Its cost of risk remained steady at 3.18% in 2024, up slightly from 3.09%, indicating stable loan quality.
- Guaranty Trust Holding Company (GTCO): GTCO incurred N253.04 billion in losses (N102.8 billion in 2023, N137 billion in 2024, N13.4 billion in Q1 2025), representing 13.95% of its N1.81 trillion net interest income, a relatively moderate impact.
- Access Holdings: With N247.34 billion in losses (N84.4 billion in 2023, N92.9 billion in 2024, N70 billion in Q1 2025), Access maintained a low cost of risk (1.25% in 2024 vs. 1.22% in 2023) and a stable NPL ratio of 2.76%, down from 2.78%, projecting an NPL ratio below 5% in 2025.
- Fidelity Bank: Fidelity recorded N128.88 billion in losses (N63.4 billion in 2023, N51.6 billion in 2024, N10.83 billion in Q1 2025). Its cost of risk improved to 1.5% from 2.6%, and its NPL ratio dropped to 3.0% from 3.5%, reflecting effective risk management.
- Stanbic IBTC: Stanbic IBTC reported N109.59 billion in losses (N16.8 billion in 2023, N88.7 billion in 2024, N4.10 billion in Q1 2025). Its cost of risk was 3.5%, with its NPL ratio rising to 4.2% from 2.4%.
- First City Monument Bank (FCMB): FCMB incurred N93.55 billion in losses (N46.75 billion in 2023, N34.12 billion in 2024, N12.69 billion in Q1 2025), representing 19.12% of its net interest income.
- Wema Bank: Wema recorded the lowest losses at N26.6 billion (N7.53 billion in 2023, N17.99 billion in 2024, N1.13 billion in Q1 2025), with a cost of risk of 3.18% and an improved NPL ratio of 3.86%, down from 4.31%.
Banks’ Resilience and Outlook
Despite the hefty impairments, banks are showing resilience. Fidelity Bank’s CEO, Nneka Onyeali-Ikpe, highlighted a 12% net interest margin in 2024, up from 8.1%, and a stable funding cost of 5.2%, underscoring efficient risk management. Access Holdings reported stable asset quality and proactive monitoring, while Zenith Bank emphasized its diversified portfolio, with 30.5% exposure to oil and gas and 26.6% to general commerce.
The Central Bank of Nigeria’s recent directive to suspend dividends and bonuses for banks with forbearance exposures, as reported on June 14, 2025, underscores the need for stronger capital buffers. However, banks’ improving NPL ratios and cost of risk metrics suggest they are weathering the storm, with many projecting NPL ratios below 5% in 2025.
Economic Implications
The N3.77 trillion in loan losses highlights the broader economic challenges facing Nigeria, including currency volatility and inflation. These impairments, representing a significant portion of banks’ net interest income, could pressure profitability and limit lending capacity, potentially slowing economic growth. However, banks’ proactive risk management and diversified portfolios offer hope for recovery, provided macroeconomic conditions stabilize.
