Nigerian Financial Holding Companies Face Significant Rise in Impairment Charges
Six prominent financial holding companies in Nigeria have reported a substantial surge in impairment charges, climbing to N1.49 trillion in 2025 from N1.06 trillion in the preceding year. This represents a significant year-on-year increase of N430.39 billion, marking a 40.66 per cent jump. These figures are derived from the unaudited financial reports for the year ending December 2025, as submitted to the Nigerian Exchange Limited.
The considerable escalation in impairment charges highlights a growing strain on loan portfolios across the banking sector. Financial institutions are contending with deteriorating asset quality and the ramifications of the Central Bank of Nigeria’s (CBN) decision to withdraw regulatory forbearance measures implemented in previous years. The financial holding companies under review include First HoldCo, Ecobank Transnational Incorporated, Stanbic IBTC Holdings, FCMB Group, Sterling Financial Holding Company, and the non-interest lender Jaiz Bank.
An in-depth analysis of these unaudited reports reveals a widespread increase in impairment charges across most of the reviewed institutions. Only one entity managed to record a decrease in its impairment provisions during this period.
Key Impairment Figures and Explanations:
-
First HoldCo: This entity reported the highest impairment charge in 2025, amounting to N748.13 billion, a sharp increase from N426.29 billion in 2024. This rise of over N321 billion represents the most substantial absolute increase among the analysed banks. The bulk of these charges is attributed to its banking subsidiary, FirstBank, which recorded an impairment of N750.73 billion. While First Securities Brokers Limited also incurred a N29 million impairment charge, FirstCap Limited experienced a positive movement of N2.63 billion in its impairment line.
Femi Otedola, Chairman of First HoldCo, explained the rationale behind the substantial N748 billion impairment charge. He stated on his X (formerly Twitter) handle that the move was intended to “clean house” by acknowledging old, bad loans rather than ignoring them. He noted that this decision led to a reported 92 per cent decline in profit, describing it as a “painful headline, but it is a serious long-term move.” Otedola emphasized that the CBN’s directive to address underlying issues prompted this proactive approach. He asserted that First HoldCo has now closed the chapter on past problematic loans, sending a clear message about the consequences of borrowing and rebuilding trust. Otedola further highlighted the underlying strength of the business, citing N2.96 trillion in interest income and N1.91 trillion in net interest income, which provided the capacity for this clean-up. He concluded that FirstBank and the broader group are entering 2026 “lighter, cleaner and better prepared for the recapitalisation era and serious growth.”
-
Ecobank Transnational Incorporated: The Pan-African banking group followed with N613.26 billion in impairment charges for 2025, up from N480.57 billion in the previous year, an increase of approximately N132.69 billion. These provisions were allocated for loans and advances, as well as other financial assets, with impairment charges on loans and advances being the most significant component at N535.48 billion.
-
FCMB Group: FCMB Group witnessed a more than doubling of its impairment charges, which rose to N86.00 billion in 2025 from N41.24 billion in 2024. The group’s banking subsidiary was again the primary contributor to this figure, reporting N85.74 billion in impairment charges.
-
Sterling Financial Holdings: Sterling Financial Holdings also recorded an upward trend, posting N26.75 billion in impairment charges for 2025, compared to N10.78 billion in 2024. Major contributors to this overall figure included impairment charges on loans, bad debts written off, and impairment on investment securities. Conversely, allowances no longer required decreased to N3.51 billion in 2025 from N12.99 billion in 2024.
-
Jaiz Bank: The non-interest lender, Jaiz Bank, reported an increase in its impairment charges, rising to N452.08 million in 2025 from N166.33 million in the prior year.
-
Stanbic IBTC Holdings: Stanbic IBTC Holdings was the sole financial holding company to experience a reduction in its impairment charges. The bank reported N14.22 billion in 2025, a significant decrease from N99.36 billion recorded in 2024.
The Impact of Withdrawn Regulatory Forbearance
The surge in impairment charges is directly linked to the Central Bank of Nigeria’s withdrawal of regulatory forbearance measures. In a circular issued on June 13, the CBN prohibited banks from paying dividends and bonuses, and from investing in foreign subsidiaries, as a consequence of the forbearance granted regarding the Single Obligor Limit and other credit facilities. Following this directive, the affected banks began implementing measures to exit such positions.
The CBN stated that the discontinuation of forbearance led to a noticeable increase in non-performing loans (NPLs) within the sector. The latest macroeconomic outlook report from the CBN indicated that the banking industry’s NPL ratio climbed to an estimated seven per cent, surpassing the prudential benchmark of five per cent. This rise was attributed to the cessation of temporary relief measures previously provided to banks to mitigate the pandemic’s impact on borrowers.
Previously, regulatory forbearance permitted banks to restructure loans affected by the pandemic without immediately classifying them as non-performing. With the removal of these measures, a number of previously restructured facilities have now materialized as bad loans, pushing the industry’s NPL ratio beyond the regulatory ceiling.
Global Rating Agencies’ Outlook
International rating agencies have issued warnings regarding the ongoing impact of exiting regulatory relief on asset quality, projecting continued pressure into 2026. S&P Global Ratings cautioned that Nigerian banks face challenges from stricter regulations but expressed optimism about their ability to maintain profitability.
In its “Nigerian Banking Outlook 2026,” published in February, S&P Global Ratings noted: “The end of regulatory forbearance will challenge asset quality while increased capital requirements come due and net interest margins come under pressure because of expected interest rate cuts. Despite this, we anticipate Nigerian banks will prove resilient and capable of preserving their profitability. This is due to growth in NII (driven by transaction fees and commission growth) and a declining but still high cost of risk. The latter will remain elevated as the Central Bank of Nigeria has removed regulatory forbearance measures and the creditworthiness of some restructured exposures remains weak. These could weigh on banks’ asset quality in 2026 and beyond, particularly if the oil price drops significantly below our expectations.”
Regarding the rise in bad loans, S&P Global stated, “NPLs increased significantly in 2025 to about 7.0 per cent compared with 4.9 per cent in 2024 because of the end of forbearance on oil-and-gas exposures. The forbearance introduced in 2020 allowed banks to maintain some exposures to this sector in Stage 2, thus limiting provisioning needs. Some banks have proactively written off exposures under forbearance measures, while others are still in the process of restructuring and writing off these exposures. The credit quality of these exposures remains weak, and they continue to be vulnerable to a drop in oil prices. We expect the oil price to average $60 in 2026 and $65 after that, which should be sufficient to keep these exposures afloat and borrowers solvent. Therefore, we expect the NPL ratio to stabilise at six to seven per cent in 2026 and stage 2 loans to remain stable at about 20 per cent – 22 per cent compared with 18 per cent – 20 per cent as of 30 Sept. 2025.”
The agency also highlighted the concentration risks within banks’ loan books: “Banks’ loan books are heavily concentrated by single name, sector, and currency. Approximately 50 per cent of loans are denominated in foreign currency, and roughly one-third are exposed to the oil and gas sector in 2026. This concentration exposes them to both economic shocks and the evolving energy transition risks. Although banks have been reducing upstream exposure, potential reforms driven by the Petroleum Investment Act could shift focus to the downstream sector. Finally, a significant portion of banks’ lending, an average of 50 per cent of gross loans, is concentrated within the top 20 loans, with considerable overlap in borrowers among the largest banks. This high level of single-name and industry concentration further elevates credit risk for certain institutions.”
Similarly, Fitch Ratings, in a commentary last October, noted that the expiry of forbearance would lead to increased loan impairment charges. Fitch stated, “banks reclassify some large stage 2 loans as impaired following the expiry of longstanding systemwide forbearance relating to the classification and provisioning of problem loans (notably oil and gas). This, combined with the expiry of forbearance relating to single-obligor limit breaches, will exert pressure on capital adequacy ratios.” However, Fitch also pointed out, “Mitigants, including restructuring of many stage 2 loans and capital raisings ahead of new paid-in capital requirements, will enable most banks to exit forbearance by end-2025.”
Both rating agencies concur that elevated provisioning levels are likely to persist through 2026, particularly if macroeconomic volatility, including exchange rate fluctuations and high borrowing costs, continues to strain borrowers.
Resilience Amidst Challenges
Despite the significant increase in impairment charges, Nigerian banks have, for the most part, maintained their profitability. This resilience has been supported by robust interest income and improved margins in a high-interest rate environment. However, analysts caution that sustained high provisioning could potentially erode returns if credit performance further deteriorates. The ongoing recapitalization drive is viewed as a crucial buffer against the impact of higher credit losses, with stronger capital positions expected to enhance the resilience of banks as they navigate the post-forbearance regulatory landscape.
