Nigerian banks face N3.77 trillion loan impairment amid macroeconomic setbacks

Ten Nigerian banks recorded N3.77 trillion in loan impairment charges from 2023 to Q1 2025, driven by Naira devaluation and inflation, yet some show resilience in managing bad loans

[dropcap]D[/dropcap]espite challenging macroeconomic conditions, ten commercial banks listed on the Nigerian Exchange (NGX) have reported a staggering total of N3.77 trillion in loan impairment charges across their full-year 2023, full-year 2024, and first-quarter 2025 financial statements.

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These charges amounted to N1.34 trillion in 2023, surged significantly to N2.13 trillion in 2024, and stood at N297.10 billion in just the first three months of 2025.

Much of this spike in bad loans is directly attributable to Nigeria’s macroeconomic volatility. Key factors include the sharp devaluation of the naira in mid-2023, soaring inflation, and higher interest rates.

These pressures have collectively squeezed corporate margins, reduced household incomes, and increased the cost of servicing debt for borrowers.

However, while these figures are substantial, the banks appear to be demonstrating some resilience in managing the storm, with key risk metrics showing stability.

The banks themselves are projecting confidence in their ability to navigate these challenging times.

Fidelity Bank, for instance, acknowledged the macroeconomic pressures in its 2024 earnings release but also highlighted improved internal performance. CEO Nneka Onyeali-Ikpe stated: “Net Interest Margin (NIM) improved to 12.0% from 8.1% due to the high-yield environment. Despite the increase in the Monetary Policy Rate, our funding cost remained relatively constant at 5.2%. Our NPL ratio improved from 3.5% to 3.0%, and the cost of risk moderated from 2.6% to 1.5%, reflecting the efficiency of our risk management processes.”

Much of the spike in bad loans can be attributed to Nigeria’s macroeconomic volatility, particularly the sharp devaluation of the naira in mid-2023, soaring inflation, and higher interest rates, all of which squeezed corporate margins, cut into household incomes, and raised the cost of servicing debt.

Access Holdings echoed a similar optimistic outlook in its 2024 results presentation: “Asset quality remains stable with a marginal improvement in the NPL ratio to 2.76% (Dec’23: 2.78%) on the back of proactive monitoring and a consolidated approach to risk management. We maintain an outlook of less than 5% NPL ratio in 2025.”

Meanwhile, Zenith Bank underscored the strength of its portfolio: “We maintain a solid portfolio quality with 96% of our loans in Stage 1 and Stage 2.

Our NPL ratio stood at 4.7% in 2024 compared to 4.4% in 2023. Oil and gas exposure accounted for 30.5%, and general commerce 26.6%, demonstrating our sectoral diversification.”

Breakdown by bank: Loan impairment charges (2023 – Q1 2025)

1. Zenith Bank: Recorded the highest total loan losses at N1.03 trillion. Despite this, its NPL coverage ratio rose to 223% in 2024 (from 171% in 2023), indicating robust provisions. Cost of risk remained flat at 7.3%.

1. Ecobank Transnational Incorporated (ETI): Loan losses hit N869.5 billion, representing over 29% of its net interest income, signaling a significant drag on earnings.

2. First Bank Holdings (First Holdco): Loan losses reached N586.94 billion, the third highest. Its NPL ratio more than doubled to 10.2% in 2024 (from 4.7% in 2023), and NPL coverage declined sharply to 51%.

3. United Bank for Africa (UBA): Saw loan losses of N423.63 billion. However, its cost of risk remained low and steady at 3.18% in 2024 (vs. 3.09% in 2023), suggesting stable loan quality.

4. Guaranty Trust Holding Company (GTCO): Reported total loan losses of N253.04 billion, a moderate figure relative to its peers.

5. Access Holdings: Reported total loan losses of N247.34 billion. The bank maintained a low and stable cost of risk (1.25% in 2024, 1.22% in 2023), indicating a healthy loan portfolio.

7. Fidelity Bank: Recorded total loan losses of N128.88 billion. The bank demonstrated a low and improving cost of risk, moderating to 1.5% in 2024 (from 2.6% in 2023).

1. Stanbic IBTC: Recorded total loan impairment charges of N109.59 billion. Its cost of risk stood at 3.5% in 2024, and NPL ratio rose to 4.2% (from 2.4% in 2023).

2. First City Monument Bank (FCMB): Recorded total loan losses of N93.55 billion.

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1. Wema Bank: Recorded total loan losses of N26.6 billion. Its cost of risk was 3.18% in 2024, and its NPL ratio improved to 3.86% (down from 4.31% in 2023).