- The Central Bank of Nigeria said large companies and Other Financial Corporations defaulted more on loans in the first quarter of 2025
- Small businesses and medium-sized private non-financial corporations recorded a positive default index in the quarter
- The CBN said there was sustained improvement in household loan performance in Q1 2025
The Central Bank of Nigeria (CBN) has reported high loan default rates among Large Private Non-Financial Corporations (PNFCs) and Other Financial Corporations (OFCs) in the first quarter (Q1) of 2025.
According to the CBN’s Credit Conditions Survey Report for Q1 2025, large firms and OFCs saw a slump in loan repayments in the quarter, with both segments recording negative default index scores of -0.6.
The default index scores show the net balance of lender responses. Negative values indicate that more lenders experienced worsening defaults than those who recorded improvements.
The report noted that there were overall improvements in loan performance across most segments, adding that the deterioration recorded by large firms and OFCs marked a return to negative credit performance for categories that recorded modest gains in previous quarters.
“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 stated.
Large corporates, OFCs reverse positive default index in previous quarters
The report also showed that large corporates and OFCs experienced a reversal from the positive default index recorded in the last two quarters of 2024.
Large corporates posted a positive default index of 4.3 in Q4 and 4.9 in Q3 2024, while OFCs recorded 5.0 and 6.8 in Q4 and Q3 2024, respectively.
However, the trend was reversed in Q2 2025, as both segments recorded negative default index scores of -0.6.
This indicates the burden of debt servicing on large corporates and other financial institutions, who typically account for a large share of commercial credit exposures.
Conversely, the smaller segments of the market had a positive run. Small businesses recorded a positive default index of 0.5 in Q2 2925, down from 9.0 in the previous quarter, while medium-sized PNFCs recorded a positive default index of 3.0, with average better loan performance among these categories.
Household lending sustained positive run
The report also showed that the performance of household loan sustained improvement in the quarter under review.
Secured loans recorded a default index of 3.9, while unsecured lending saw a 5.0 score in Q1 2025.
The figures indicate that the household loan segment maintained its rebound from the negative score recorded in 2022 and early 2023, when household loan defaults had been a major source of concern for lenders.
The CBN report added that there was increased demand for credit in the household loan segment in Q1 2025, particularly for overdrafts and personal loans.
There was, however, a weaker demand for mortgage and credit card products during the quarter.
Lenders tightened credit conditions in Q1 2025
The CBN report added that during the quarter, lenders tightened credit scoring criteria amid increased credit demand, especially for corporate and secured lending.
According to the data, the proportion of loan approvals increased for secured and corporate lending but dipped for unsecured lending.
The demand for corporate loans was driven largely by inventory finance needs, which lenders identified as the leading factor influencing borrowing trends during the quarter.
According to the report, lenders reported that loan spreads over the Monetary Policy Rate (MPR) widened across most categories.
It noted that both secured and unsecured household lending saw higher spreads, reflecting tighter risk pricing.
It was the same for corporate loans, except for OFCs, which recorded a narrowing of spreads in Q1 2025.
Banks, other financial institutions reported higher loan default rates in Q4 2024 – CBN
Meanwhile, TheRadar earlier reported that the Central Bank of Nigeria (CBN) said lenders, including commercial banks and other financial institutions, recorded higher default rates for secured, unsecured, and corporate loans in the fourth quarter (Q4) of last year 2024.
The CBN revealed this in its Q4 2024 Credit Conditions Survey Report published on its website.
