The Central Bank of Nigeria (CBN) has reported a concerning uptick in loan defaults among Large Private Non-Financial Corporations (PNFCs) and Other Financial Corporations (OFCs), signaling renewed credit stress at the top end of the lending market.
According to the CBN’s Credit Conditions Survey Report for Q1 2025, both segments posted negative default index scores of -0.6, reflecting a deterioration in debt servicing performance after recording improvements in previous quarters.
While loan performance across most market segments improved, the data shows that large corporates and financial firms are once again falling behind on repayments—a development that could pose wider risks to banking sector stability. In contrast, small and medium-sized businesses demonstrated stronger repayment behaviour, with default index scores of 0.5 and 3.0 respectively.
“Lenders reported lower default rates for Secured and Unsecured lending in the review quarter. For Corporate lending, Small businesses and Medium PNFCs reportedly had lower default rates, but Large PNFCs and OFCs had higher default rates,” the report noted.
This marks a reversal from Q4 2024, when large corporates and OFCs recorded positive default index scores of 4.3 and 5.0, respectively, highlighting the growing pressure on large borrowers amid ongoing economic reforms.
The household segment continued to show resilience, with secured loans recording a default index of 3.9 and unsecured loans improving to 5.0 in Q1 2025. This recovery, driven by increased demand for personal loans and overdrafts, follows a challenging period in 2022 and early 2023 when household defaults spiked.
Despite an uptick in demand for corporate and secured lending, lenders tightened credit scoring criteria during the quarter. Approval rates increased for secured and corporate loans but declined for unsecured lending, reflecting a more cautious and risk-sensitive lending environment.
Loan pricing also shifted, with spreads over the Monetary Policy Rate (MPR) widening across most categories. OFCs were the exception, with a narrowing of spreads—suggesting that some lenders may be cautiously optimistic about future liquidity or expecting regulatory support.
The rise in default rates among large corporates and financial institutions may prompt banks to reassess risk exposure and tighten credit policies, especially for high-value loans. Although improved repayment in household and SME segments is encouraging, overall credit risk remains uneven.
The CBN clarified that the report reflects the sentiments of surveyed lenders and does not represent its official stance. Nonetheless, the findings serve as an important indicator of credit market trends and financial system sentiment in Nigeria.
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