The Central Bank of Nigeria (CBN) has reported excessive mortgage default charges amongst Massive Personal Non-Monetary Companies (PNFCs) and Different Monetary Companies (OFCs), elevating contemporary considerations about credit score danger on the higher finish of the lending market.
That is in line with the apex bank’s Credit score Circumstances Survey Report for the primary quarter of 2025.
Regardless of general enhancements in mortgage efficiency throughout most segments, the report exhibits that enormous companies and OFCs skilled a deterioration in mortgage repayments, with each segments posting detrimental default index scores of -0.6.
This marks a return to hostile credit score efficiency for classes that had proven modest beneficial properties in earlier quarters.
The report learn, “Lenders reported decrease default charges for Secured and Unsecured lending within the evaluate quarter. For Company lending, Small companies and Medium PNFCs reportedly had decrease default charges, however Massive PNFCs and OFCs had larger default charges.”
Defaults worsen for giant corporates and monetary establishments
The default index scores characterize the online stability of lender responses, with detrimental values indicating that extra lenders skilled worsening defaults than those that recorded enhancements.
- In This fall 2024, giant corporates had posted a optimistic default index of 4.3, following a 4.9 rating in Q3. OFCs equally carried out higher within the earlier two quarters, recording 5.0 and 6.8, respectively.
- Nevertheless, the newest studying suggests a reversal of that development, pointing to elevated pressure on debt servicing capabilities amongst giant companies and monetary establishments. This growth is important as these debtors usually account for a big share of economic credit score exposures.
- Whereas giant entities struggled, smaller segments of the market confirmed indicators of restoration. Small companies recorded a optimistic default index of 0.5, though down from 9.0 within the earlier quarter, whereas medium-sized PNFCs noticed their index settle to three.0, with common higher mortgage efficiency amongst these classes.
- This development aligns with latest lending patterns that present elevated entry to credit score and better mortgage approvals for smaller companies. Lenders are seeing stronger reimbursement behaviours from these debtors, which can be linked to stricter mortgage underwriting requirements and improved enterprise money flows.
Family lending continues optimistic run
The report additionally signifies sustained enchancment in family mortgage efficiency. Secured loans recorded a default index of three.9, whereas unsecured lending got here in at 5.0 in Q1 2025. These figures mirror a continued rebound from the detrimental territory recorded in 2022 and early 2023, when family mortgage defaults had been a significant supply of concern for lenders.
The beneficial properties in family lending coincide with elevated demand for credit score within the phase, significantly for overdrafts and private loans. Nevertheless, lenders reported weaker demand for mortgage and bank card merchandise in the course of the quarter.
Credit score situations tighten amid rising demand
The CBN survey exhibits that whereas credit score demand elevated—particularly for company and secured lending—lenders concurrently tightened credit score scoring standards in Q1 2025. The proportion of mortgage approvals rose for secured and company lending however fell for unsecured lending, suggesting that lenders have gotten extra selective, even amid robust urge for food for credit score.
- Notably, the demand for company loans was closely pushed by stock finance wants, which lenders recognized because the main issue influencing borrowing tendencies in the course of the quarter.
- On the pricing entrance, lenders reported that mortgage spreads over the Financial Coverage Fee (MPR) widened throughout most classes. Each secured and unsecured family lending noticed larger spreads, indicating tighter danger pricing. For company loans, spreads additionally widened—except OFCs, which recorded a narrowing of spreads in Q1 2025.
This divergence might counsel that some lenders are trying to accommodate OFCs regardless of their worsening default efficiency, presumably in anticipation of improved liquidity or authorities intervention.
Implications for credit score danger and coverage
The renewed decline in mortgage efficiency amongst giant companies and OFCs might weigh on general banking sector confidence, particularly in gentle of ongoing macroeconomic changes.
Whereas enhancements in family and SME segments are encouraging, the poor efficiency on the high finish of the credit score spectrum might lead to elevated provisioning, tighter credit score insurance policies, or extra cautious lending for large-ticket loans.
The CBN famous that the report displays the views of taking part lenders and doesn’t characterize the official place of the Bank. Nonetheless, the findings are a helpful barometer for credit score sentiment and danger evaluation in Nigeria’s monetary system.
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