Fitch Ratings has said Nigerian banks are now in a stronger position to handle the end of regulatory relief measures, explaining that recent capital raising, loan restructuring, and improved earnings have created buffers to absorb possible shocks.
In its latest peer analysis of Nigerian lenders, the global rating agency explained that while the phasing out of forbearance would inevitably push some Stage 2 loans into impaired categories and exert pressure on total capital adequacy ratios, the sector has made progress in strengthening its capacity to withstand the transition.
In the report posted on its website yesterday, they stated: “The vast majority of Nigerian banks are expected to exit longstanding forbearance by end-2025, even though the expiry of forbearance will lead to some large Stage 2 loans being reclassified as impaired, Fitch Ratings says in a new peer credit analysis on the country’s major banks.
“The banks’ preparedness is supported by the restructuring of many Stage 2 loans, capital raisings across the banking sector spurred by a large increase in paid-in capital requirements, and increased loss-absorption capacity resulting from improved net interest margins.
“This will help counteract increased loan impairment charges and prudential provisions resulting from the expiry of forbearance and the associated pressure on total capital adequacy ratios across the banking sector.”
It added that while the vast majority of Nigerian banks were expected to exit forbearance by the end of 2025, certain institutions would continue to operate under regulatory accommodation subject to penalties, including restrictions on dividend payments.
“Certain banks will be allowed to continue operating under forbearance, subject to certain penalties, including the inability to pay dividends,” the rating agency added.
The agency also noted that the recent devaluation of the naira has had a positive effect on banks’ foreign currency liquidity, as it boosted turnover in the foreign exchange market.
Fitch noted that Nigerian lenders generally have sufficient liquidity to meet upcoming Eurobond obligations, with $2.2 billion in maturities or callable instruments due by end-2026.
“The naira devaluation has been positive for the banking sector’s foreign-currency liquidity as it has led to higher FX market turnover. Eurobonds totalling $2.2 billion mature or are callable by end-2026.
“The banks generally have sufficient liquidity to meet their Eurobond obligations without needing to refinance.”
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