Loan Defaults Rise in Nigeria as CBN Flags Increased Pressure on Credit Market
Nigeria’s credit market is experiencing mounting strain, with the Central Bank of Nigeria (CBN) reporting a notable increase in loan defaults across unsecured and corporate lending in the third quarter of 2025. The findings signal growing vulnerabilities among households and businesses amid persistent macroeconomic pressures.
The CBN’s quarterly Credit Conditions Survey, dated September 2025, shows that unsecured loans, commonly utilised by cash-strapped households and businesses, recorded the sharpest decline in repayment performance. Corporate loan defaults also rose, affecting small enterprises, medium-sized private non-financial corporations, large companies, and other financial institutions. In contrast, secured loans performed relatively better, demonstrating greater resilience in repayment trends.
Analysts attribute these developments to high interest rates, rising operational costs, and weakened consumer demand, which have collectively stressed the financial capacity of borrowers.
Credit Supply and Borrower Demand
Despite rising defaults, lenders expanded overall credit availability during Q3 2025. The CBN noted that expectations for economic recovery and a cautious shift in lenders’ risk appetite contributed to growth in both secured and unsecured credit supply. Borrowing demand increased across household consumer loans, house purchase credit, and corporate loans for small, medium, and large businesses. However, demand slowed for secured mortgages, remortgages, and unsecured credit card facilities as households navigated tighter financial conditions.
The survey highlights widening spreads on household credit relative to the Monetary Policy Rate, with secured and unsecured lending spreads reported at -0.1 and -1.8 index points respectively. Corporate lending spreads varied, narrowing for medium-sized firms and other financial corporations, while widening for small businesses and large corporates reflecting diverse risk perceptions across sectors
Implications for Banks and Borrowers
The CBN report underscores the need for financial institutions to strengthen risk assessment frameworks and for borrowers to maintain disciplined repayment practices amid ongoing economic uncertainty. Lenders approved a higher proportion of loan requests across all categories, signalling continued willingness to support credit growth even as repayment challenges intensify.
Conclusion
As unsecured and corporate loan defaults rise, the CBN’s findings indicate both opportunities and risks for Nigeria’s financial sector. Effective credit management, combined with robust risk assessment and borrower discipline, will be critical to sustaining growth and stability in the nation’s credit ecosystem.
