Loan Defaults Rise Despite Easier Credit as Borrower Stress Deepens in Q4 2025
Banks in Nigeria recorded a notable increase in loan defaults in the fourth quarter of 2025, highlighting growing financial pressure on both households and businesses, even as access to credit improved.
This was revealed by the Central Bank of Nigeria (CBN) in its Credit Conditions Survey (CCS) Report for Q4 2025.
Defaults Climb Across All Loan Categories
According to the CBN survey:
• Household loans:
• Defaults increased on both secured (e.g., mortgages) and unsecured loans (e.g., personal and consumer loans).
• Corporate loans:
• Higher default rates were recorded across all segments, including:
• Small businesses
• Private non-financial corporations (PNFCs)
• Other financial corporations (OFCs)
This indicates widespread repayment stress, not limited to any single borrower group.
Credit Availability Improved — But Risks Rose
Interestingly, the rise in defaults occurred despite better access to credit:
• Banks reported increased credit availability for:
• Secured household loans
• Unsecured consumer loans
• Corporate lending
• This expansion was driven by:
• A changing economic outlook
• Banks’ efforts to grow market share
At the same time:
• Demand for credit strengthened, especially for:
• Consumer loans
• Mortgages
• Overdrafts
• Corporate loans for inventory financing and capital investment
However, many borrowers struggled to meet repayment obligations as lending expanded.
⚠️ Higher Lending, Higher Credit Risk
The survey shows that while banks were lending more:
• Financial strain on borrowers persisted, reflecting:
• High interest rates
• Elevated cost of living
• Weak cash flows for businesses
This mismatch between credit growth and repayment capacity pushed default rates higher.
Banks Adjust Loan Pricing to Manage Risk
To cope with rising defaults, banks adjusted pricing differently across segments:
Household Loans
• Wider spreads on secured and unsecured household loans relative to the Monetary Policy Rate (MPR)
• Indicates tighter risk pricing and caution toward consumer borrowers
Corporate Loans
• Narrower spreads for:
• Small businesses
• Large PNFCs
• Other financial corporations (OFCs)
• Wider spreads for medium-sized PNFCs
This shows banks are selectively pricing risk, rather than applying a blanket approach.
What This Means for the Economy
• Rising defaults suggest households and firms remain under pressure, despite improved credit access.
• Banks may become more cautious going forward, especially toward consumer lending.
• Corporate borrowers with strong cash flows are likely to enjoy better pricing, while weaker firms may face higher borrowing costs.
Key Takeaway
The Q4 2025 data paints a clear picture:
More credit is flowing, but repayment capacity is lagging.
Until inflation, interest rates and business conditions ease more meaningfully, credit risk will remain elevated, shaping bank lending behaviour well into 2026.
Banks in Nigeria recorded a notable increase in loan defaults in the fourth quarter of 2025, highlighting growing financial pressure on both households and businesses, even as access to credit improved.
This was revealed by the Central Bank of Nigeria (CBN) in its Credit Conditions Survey (CCS) Report for Q4 2025.
Defaults Climb Across All Loan Categories
According to the CBN survey:
• Household loans:
• Defaults increased on both secured (e.g., mortgages) and unsecured loans (e.g., personal and consumer loans).
• Corporate loans:
• Higher default rates were recorded across all segments, including:
• Small businesses
• Private non-financial corporations (PNFCs)
• Other financial corporations (OFCs)
This indicates widespread repayment stress, not limited to any single borrower group.
Credit Availability Improved — But Risks Rose
Interestingly, the rise in defaults occurred despite better access to credit:
• Banks reported increased credit availability for:
• Secured household loans
• Unsecured consumer loans
• Corporate lending
• This expansion was driven by:
• A changing economic outlook
• Banks’ efforts to grow market share
At the same time:
• Demand for credit strengthened, especially for:
• Consumer loans
• Mortgages
• Overdrafts
• Corporate loans for inventory financing and capital investment
However, many borrowers struggled to meet repayment obligations as lending expanded.
⚠️ Higher Lending, Higher Credit Risk
The survey shows that while banks were lending more:
• Financial strain on borrowers persisted, reflecting:
• High interest rates
• Elevated cost of living
• Weak cash flows for businesses
This mismatch between credit growth and repayment capacity pushed default rates higher.
Banks Adjust Loan Pricing to Manage Risk
To cope with rising defaults, banks adjusted pricing differently across segments:
Household Loans
• Wider spreads on secured and unsecured household loans relative to the Monetary Policy Rate (MPR)
• Indicates tighter risk pricing and caution toward consumer borrowers
Corporate Loans
• Narrower spreads for:
• Small businesses
• Large PNFCs
• Other financial corporations (OFCs)
• Wider spreads for medium-sized PNFCs
This shows banks are selectively pricing risk, rather than applying a blanket approach.
What This Means for the Economy
• Rising defaults suggest households and firms remain under pressure, despite improved credit access.
• Banks may become more cautious going forward, especially toward consumer lending.
• Corporate borrowers with strong cash flows are likely to enjoy better pricing, while weaker firms may face higher borrowing costs.
Key Takeaway
The Q4 2025 data paints a clear picture:
More credit is flowing, but repayment capacity is lagging.
Until inflation, interest rates and business conditions ease more meaningfully, credit risk will remain elevated, shaping bank lending behaviour well into 2026.