Nigeria’s Bank Loan Defaults Rise Despite Increased Credit in Q3 2025

Abuja, Nigeria
Loan repayment defaults in Nigeria’s banking sector rose in the third quarter of 2025, even as lenders expanded credit availability, according to the Central Bank of Nigeria (CBN) Credit Condition Survey released on November 19, 2025.
The survey highlighted rising stress in secured household loans, while default rates on unsecured loans declined, reflecting a mixed performance across the banking sector.
The report revealed that banks experienced higher default rates on secured loans during Q3 2025, signaling growing repayment pressure among households with collateralized borrowing.
In contrast, unsecured loans recorded lower default rates, with the improvement largely attributed to changes in lenders’ risk appetite, which allowed them to cautiously extend unsecured credit despite economic uncertainties.
Overall, credit availability expanded across all lending categories. Respondents indicated that the percentage of loan approvals increased for secured, unsecured, and corporate lending compared to the previous quarter.
The rise in secured and corporate credit was linked to an improving economic outlook, while the boost in unsecured lending stemmed from lenders’ willingness to take on additional risk.
Interest rate spreads relative to the Monetary Policy Rate (MPR) reflected shifts in the cost of borrowing during the review quarter. For household lending, spreads widened slightly, with secured loans at -0.1 index points and unsecured loans at -1.8 index points. In corporate lending, spreads narrowed for Medium Private Non-Financial Corporations (PNFCs) and Other Financial Corporations (OFCs) to 2.6 and 14.4 index points, respectively. Meanwhile, spreads widened for small businesses and large PNFCs to -0.8 and -0.4 index points, reflecting strategic adjustments by banks to balance risk and profitability.
Corporate lending remained largely resilient during the quarter, with small businesses, medium and large PNFCs, and OFCs reporting lower default rates, indicating a stronger repayment capacity than households. Analysts say this divergence highlights potential vulnerabilities in household lending, particularly in secured loans, which are more sensitive to economic pressures such as inflation and high borrowing costs.
The CBN survey underscores a delicate balancing act for banks: expanding credit is essential to support economic growth, but rising defaults in secured loans highlight the importance of prudent risk management.
Banks are advised to tighten underwriting standards for collateralized lending, while regulators are expected to maintain close oversight of loan quality. Borrowers are also urged to carefully assess their repayment capacity, particularly before taking on secured loans.
The data for Q3 2025 paints a nuanced picture: credit is expanding across the economy, corporate borrowers are largely meeting obligations, and unsecured loans remain relatively stable. Yet, the increase in secured loan defaults serves as a cautionary signal that economic pressures on households could pose a risk to the stability of Nigeria’s banking system in the coming months.
As banks navigate this environment, careful monitoring of non-performing loans, loan spreads, and repayment trends will be critical. The CBN survey makes clear that while credit growth is necessary to fuel economic recovery, lenders and regulators must act prudently to ensure that optimism in lending does not compromise financial stability.