Nigerian banks have successfully raised capital to meet new regulatory requirements, allowing them to absorb additional provisions for impaired loans. This move has enabled many banks to exit a period of forbearance and address breaches of single-obligor limits. Fitch Ratings, a UK-based firm, stated these capital raisings helped banks maintain their minimum total capital adequacy ratios.
The withdrawal of longstanding regulatory forbearance at the end of the first half of 2025 significantly increased Nigeria's banking sector's impaired loans. Consequently, the impaired loans ratio climbed to 8% in January 2026, up from 4.5% at the end of 2024. However, strong internal capital generation and the new capital injections have mitigated this pressure. Fitch expects the impaired loan ratio to decrease to about 5% by the end of 2026 due to higher oil production and prices, alongside loan write-offs.
This situation reflects a broader trend in African financial markets where regulatory shifts impact bank stability and profitability. Ghana’s banking sector also regularly faces oversight and adjustments to maintain financial health. The ability of Nigerian banks to adapt to stricter capital requirements highlights the resilience needed in dynamic economic environments. Data from financial rating agencies often provides critical insights into the health of West African economies.
Fitch Ratings confirmed that capital raisings helped banks absorb additional provisions. These provisions included prudential provisions that disregard collateral, and capital deductions from single-obligor limit breaches. The firm noted that banks generally remained compliant with their total capital adequacy ratio requirements. Nigerian banks’ profitability declined in 2025 due to higher loan impairment charges and a lack of foreign exchange revaluation gains from the 2023-2024 naira devaluation.
As Nigerian banks stabilize their balance sheets, the focus will now shift to deploying fresh capital. Fitch forecasts loan growth to accelerate to about 20% in 2026, a significant jump from 2% in 2025. This increased lending will likely support broader economic growth within Nigeria. Decision-makers and investors will closely monitor how this new capital translates into economic activity and sustained profitability for the banking sector.
The devaluation of the Nigerian naira has also, perhaps surprisingly, boosted the sector's foreign-currency liquidity. It led to higher foreign-exchange market turnover, which proved timely for several banks with maturing Eurobonds. Fitch anticipates a slight improvement in profitability in 2026. This improvement will stem from declining loan impairment charges and stable net interest margins. The Central Bank of Nigeria is expected to pause its monetary easing in response to renewed inflationary pressures.