The world’s largest credit rating agency, S&P Global Ratings (S&P), has predicted that the lifting of forbearance by the Central Bank of Nigeria (CBN) from June 2025 will likely lead to higher Non-Performing Loans (NPLs) for banks this year.

In a report released over the weekend, the credit rating agency said that while it projects that the lifting of forbearance will push up the NPLs ratio to “six per cent to seven per cent of gross loans from June 2025 compared with an estimated four per cent at year-end 2024,” it expects most of the banks to absorb the impact, “thanks to good earnings.”

According to the agency, rising capitalization, following the increase in the CBN’s minimum capital requirements, will also help banks to manage the end of forbearance measures well.

It said: “The lifting of forbearance by the Central Bank of Nigeria (CBN) from June 2025 will likely lead to higher nonperforming loans for Nigerian banks in 2025. However, in our view, most of them should absorb the impact thanks to good earnings. Rising capitalization, following the increase in the CBN’s minimum capital requirements, will help.”

The credit rating agency, which predicted that some loans would be restructured, thus ensuring that there is no immediate hit to banks’ bottom lines, also said it expected “growth in net interest income amid high interest rates (to) support banks’ profitability.”

The report said: “COVID-19 forbearance measures are ending for the oil and gas sector. During the pandemic, the CBN introduced measures to help banks manage deterioration in these companies’ creditworthiness.

Specifically, banks were allowed to maintain specific exposure to the sector in Stage 2 and set aside less than the required provisions if these loans moved to Stage 3. This sought to give banks and these companies breathing space to deal with the COVID-19-induced shock.

“The regulator is also returning to a stricter control of compliance with single obligor limits, after granting waivers in the past couple of years because of the significant naira depreciation in 2023. To be pragmatic and ensure smooth transition, the CBN increased temporarily

the amount of additional Tier 1 capital recognition in the capital adequacy ratio computation for the nine months to March 31, 2026. The central bank also introduced restrictions on dividend payments and bonuses to directors and senior management, as well as limits on investments in foreign subsidiaries for banks benefiting from the temporary concession.