The International Monetary Fund (IMF) has warned Nigerian regulators to remain vigilant over rising non-performing loans (NPLs) despite acknowledging that the country’s banking system has become more resilient following the ongoing recapitalisation exercise.
In its latest Article IV consultation on Nigeria, the IMF said the financial sector remains stable but cautioned that growing credit risks and banks’ exposure to government debt require close monitoring.
“Directors welcomed that the financial system remains resilient, helped by the recent recapitalisation of banks, while encouraging continued vigilance of rising NPLs and the sovereign-bank nexus,” the Fund said.
The warning comes as Nigeria’s banking sector undergoes one of its most significant regulatory overhauls in years, driven by the Central Bank of Nigeria’s recapitalisation programme and a series of stress tests aimed at strengthening lenders’ balance sheets.
The IMF’s assessment suggests that while banks have improved their capacity to absorb shocks, concerns remain over the quality of loan portfolios and the potential risks arising from banks’ increasing holdings of government securities.
