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The short answer
The non-performing loans (NPL) ratio is the share of a bank's loans on which payments are 90 days or more overdue. The CBN's prudential limit is 5%; in its 2026 macroeconomic outlook, reported on 3 January 2026, the CBN estimated the industry ratio at about 7%, raised by the end of COVID-era forbearance.
The definition
Under the CBN's Prudential Guidelines for deposit money banks (2010), a loan is non-performing when principal or interest is 90 days or more past due. The ratio is:
NPL ratio = non-performing loans ÷ total gross loans × 100
A ratio of 7% means ₦7 of every ₦100 lent is in serious arrears.
How banks classify and provide for bad loans
| Class | Days past due | Minimum provision (2010 guidelines) |
|---|---|---|
| Substandard | 90 to under 180 | 10% |
| Doubtful | 180 to under 360 | 50% |
| Lost | 360 or more | 100% |
Provisions are charged against profit. Specialised annexures to the guidelines, for longer-tenor lending, add watchlist and very doubtful categories. Today banks also report under IFRS 9, which uses expected-loss stages; the CBN's prudential classification sits alongside it.
Worked example
Example: a bank lends ₦1,000bn. ₦30bn is 100 days overdue (substandard), ₦20bn is 200 days overdue (doubtful) and ₦10bn is over a year overdue (lost). NPLs = ₦60bn, so the NPL ratio is 6%. Minimum provisions: 10% × 30 = ₦3bn, 50% × 20 = ₦10bn, 100% × 10 = ₦10bn, total ₦23bn charged against profit.
The CBN threshold and the sector figure
The CBN's prudential limit for the NPL ratio is 5%. In its 2026 outlook, "Consolidating Macroeconomic Stability amid Global Uncertainty", reported by ThisDay and syndicated by AllAfrica on 3–4 January 2026, the CBN estimated the industry NPL ratio at about 7% and said rising NPLs "pose a direct threat to banks' profitability, credit availability, and overall risk-bearing capacity". It linked the rise to the withdrawal of relief granted during the pandemic. The report did not give an as-at date for the 7% figure; the CBN updates it in its Financial Stability Reports and MPC communiqués.
Why forbearance pushed the ratio up
Under forbearance, some loans that would otherwise be classified as non-performing were held outside that category, or allowed to exceed lending limits, while they were restructured. In June 2025 the CBN suspended dividends at banks still under forbearance until they exit (forbearance explained). As relief ends, loans are classified on normal rules, so the ratio can rise even if borrowers behave no worse than before.
Limits of the ratio
The ratio is a snapshot. A bank growing its loan book fast can show a low ratio simply because new loans have not had time to go bad. Write-offs remove lost loans from the figure, so a bank that writes off aggressively can look cleaner than one that keeps chasing old debts. Read it with the coverage ratio (provisions divided by NPLs) and the trend over several years.
What it means for you
- As a depositor: a high NPL ratio squeezes profits and capital, but your deposit is insured by the NDIC up to the applicable limit (NDIC limits).
- As a borrower: when NPLs rise, lenders tighten checks and lean harder on credit bureau records (credit scores in Nigeria). Keeping your own loans current protects your record.
- As an investor: compare a bank's NPL ratio with the 5% limit and its own trend (how to judge a bank's health).
Questions people ask
What is a good NPL ratio for Nigerian banks?
At or below the CBN's 5% prudential limit, and falling.
When does a loan become non-performing in Nigeria?
When principal or interest is 90 days or more past due, under the CBN Prudential Guidelines.
What is the NPL ratio of Nigerian banks in 2026?
The CBN's 2026 outlook estimated about 7%, above the 5% limit, as reported in January 2026.
What happens when a loan is classified as lost?
The bank must provide 100% of it against profit, though it can still try to recover the debt.
Sources
- CBN: Prudential Guidelines for Deposit Money Banks (2010) · accessed Oct 2026
- AllAfrica/ThisDay: CBN, rising NPLs threat to banks' profitability, credit availability (3 Jan 2026) · accessed Oct 2026
- UUBO: CBN suspends dividend and bonus payments (Jun 2025) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.