The vast majority of Nigerian banks are expected to exit longstanding forbearance by the end of 2025, even though the expiry of forbearance will lead to some large Stage 2 loans being reclassified as impaired, Fitch Ratings has revealed in a new peer credit analysis on the country’s major banks.

According to the UK-based firm, the banks’ preparedness is supported by the restructuring of many Stage 2 loans, capital raisings across the banking sector spurred by a large increase in paid-in capital requirements, and increased loss-absorption capacity resulting from improved net interest margins.

This will help counteract increased loan impairment charges and prudential provisions resulting from the expiry of forbearance and the associated pressure on total capital adequacy ratios across the banking sector.

It pointed out that certain banks will be allowed to continue operating under forbearance, subject to certain penalties, including the inability to pay dividends.

It added that the naira devaluation has been positive for the banking sector’s foreign-currency liquidity as it has led to higher foreign exchange market turnover.

A total of US$2.2 billion will mature by the end of 2026.

Fitch concluded that he banks generally have sufficient liquidity to meet their Eurobond obligations without needing to refinance.