Eight leading Nigerian banks recorded a combined N156 billion in impairment charges on credit and financial assets in the first quarter (Q1) of 2025, reflecting the sector’s ongoing battle with macroeconomic volatility, loan defaults, and credit risk exposure.
According to an analysis of unaudited financial statements filed on the Nigerian Exchange Limited (NGX), the impairment charges—provisions set aside for potential loan losses—underscore the rising cost of risky lending amid inflationary pressures, naira depreciation, and sluggish business liquidity.
While the cumulative impairment charges dropped by 5.2 per cent compared to N164.53bn in Q1 2024, individual banks showed varied performances, with some recording sharp increases in provisions, while others achieved significant declines through loan recoveries and improved credit risk management.
Zenith Bank posted the highest impairment charge at N49.38bn, though this represents an 11.8 per cent drop from N55.97bn in Q1 2024. Analysts attribute the decline to improved loan recoveries and better asset quality, as loans and advances accounted for N35.95bn, while investment securities and treasury bills contributed N7.1bn and N2.16bn, respectively.
Despite the high provisioning, Zenith delivered a strong bottom line, with profit after tax rising 20.7 per cent to N311.83bn from N258.34bn.
First HoldCo followed closely with N37.25bn in impairment charges, down 11.2 per cent year-on-year. The bulk of the provision came from loans and advances (N41.23bn), partially offset by reversals on other assets and off-balance sheet items. However, profit fell to N171.10bn from N208.11bn in Q1 2024, reflecting tighter margins.
While some banks reduced their provisioning, United Bank for Africa (UBA) reported a significant 332.2 per cent surge in impairment charges, jumping to N14.18bn from N3.28bn in Q1 2024. This was driven by increased allowances on credit losses (N11.12bn) and additional provisions on investment securities (N3.06bn).
Similarly, Fidelity Bank recorded a 285.8 per cent spike in impairment charges, rising to N8.66bn from N2.25bn. Analysts link the surge to broader asset write-downs and rising credit risks.
Access Holdings posted N21.77bn in impairment charges, down 4.5 per cent year-on-year, aided by a reduction in write-offs and tighter credit risk monitoring. Profit after tax rose 14.7 per cent to N182.75bn.
FCMB reported one of the most significant improvements, with impairment charges plunging 59.9 per cent to N9.52bn from N23.71bn, thanks to substantial loan recoveries (N4.11bn). Profit rose to N32.23bn from N28.77bn.
Guaranty Trust Holding Company (GTCO) maintained relatively stable impairment charges at N13.42bn, a marginal 0.5 per cent decline. However, profit after tax fell sharply by 43.6 per cent to N258.03bn, driven by other operational factors.
Wema Bank also saw impairment charges rise 64.7 per cent to N1.82bn, reflecting its expanding loan book and growing risk exposure.
Commenting on the trend, Charles Sanni, CEO of Cowry Treasurers Limited, noted that the approach to impairment charges reveals banks’ risk appetite and credit monitoring efficiency.
“Some banks are deliberately aggressive in writing off non-performing loans, a strategy described as ‘biting the bullet,’ while others choose to carry more bad loans to boost income, which is risky in volatile markets,” Sanni said.
He explained that proactive banks are now focusing on sectors sensitive to interest rate fluctuations and macroeconomic risks, carefully monitoring borrowers’ leverage levels to reduce exposure.
According to him, rising loan volumes, driven by inflationary pressures and increased financing demand in oil, gas, and manufacturing sectors, will continue to boost bank earnings, but sustainability will depend on effective credit risk management.
The decline in overall impairment charges suggests improved risk management in some banks, but the sharp increases recorded by UBA, Fidelity, and Wema highlight the uneven impact of Nigeria’s economic challenges. With inflation still high and the naira under pressure, analysts expect impairment charges to remain a key determinant of profitability in 2025.