By Ayo Kehinde
The Central Bank of Nigeria (CBN) has reported an expansion in credit to the private sector alongside a rise in loan defaults in the fourth quarter of 2025, reflecting both improved lending activity and mounting repayment pressures in the economy.
According to the CBN’s latest financial stability and credit conditions data, banks increased lending to households and businesses during the period, supported by strong demand for working capital, trade financing and consumer loans.
The credit growth followed earlier monetary and regulatory measures aimed at sustaining economic activity.
However, the apex bank noted that asset quality weakened, as non-performing loans (NPLs) edged higher in Q4 2025.
The increase in loan defaults was attributed to elevated borrowing costs, inflationary pressures, and foreign exchange-related challenges affecting corporate cash flows, particularly in trade-dependent sectors.
The CBN said while the banking system remains resilient and well-capitalised, the rising defaults highlight the need for cautious risk management by lenders.
Banks were urged to strengthen credit appraisal, monitoring, and recovery processes amid a tight monetary environment.
The contrasting trends underscore the delicate balance policymakers face in supporting credit growth while safeguarding financial system stability as economic reforms continue into 2026.
