NPL ratio remains below CBN benchmark
Analysts hail prudent lending strategy
By Mary Onyia
Sterling Bank has emerged as one of Nigeria’s strongest performers in credit risk management after sustaining its non-performing loan (NPL) ratio below the Central Bank of Nigeria’s prudential threshold for a decade.
The milestone comes against the backdrop of a challenging operating environment characterized by high inflation, foreign exchange volatility, elevated interest rates and pressure on businesses across key sectors of the economy.
Despite these headwinds, Sterling Bank has consistently maintained the quality of its loan portfolio, limiting the build-up of bad loans while continuing to support customers and productive sectors of the economy.
According to the bank, it’s non-performing loan ratio has remained largely stable over the past decade, rising marginally from 4.80 per cent in the first quarter (Q1) of 2016 to 4.93 per cent in Q1 2026, while staying below the Central Bank of Nigeria’s five per cent prudential threshold.
The bank’s ratio remained far lower than the industry’s performance of eight per cent to nine per cent in Q1.
Bad loans in Nigeria’s banking sector stood at 8.03 per cent in January 2026. The figure, contained in the CBN’s January 2026 Economic Report, showed that the industry’s non-performing loans ratio rose by 0.52 percentage point from 7.51 per cent in December 2025.
It also remained above the CBN’s prudential threshold of five per cent, indicating a further deterioration in asset quality across the banking industry despite the apex bank’s insistence that the sector remained resilient.
“Following the bank’s loan reclassification after the withdrawal of forbearance, the non-performing loans ratio rose by 0.52 percentage point to 8.03 per cent compared with the level in the preceding period and was above the 5.00 per cent prudential threshold”, the apex bank said.
The average (NPL) ratio for the Nigerian banking sector reached 9.85 per cent by February.
The CBN warned that a stubborn rise in non-performing loans could impair asset quality and weaken banks’ balance sheets, thereby posing systemic risk.
It recommended deepening the operational integration of the GSI framework across all financial institutions to enhance loan recovery efficiency and credit discipline.
The CBN also recommended strengthening credit discipline and reducing NPLs by fully integrating the Global Standing Instruction framework to boost loan recovery efficiency.