2025: The Year Nigeria’s Tier-1 Banks Faced Their Deferred Bill
Managing the lending portfolio sits at the heart of banking because lending is both the engine of profit and the source of its greatest risk. It is the highest earning asset on a bank’s balance sheet, outpacing investments and reserves in return, and it is through lending that banks meet regulatory objectives, deepen relationships with business customers, and channel credit into the parts of the economy they serve. A banker’s reputation has historically rested on this function: to be called astute is to be known as someone who can lend safely and profitably. It is no surprise that technical training, career advancement, and high salaries in banking have long been tied to mastery of the lending function.
Yet the very qualities that make lending profitable also make it perilous. A loan portfolio is the most illiquid part of a bank’s assets. Although a bank has the legal right to call loans on three days’ notice, doing so in practice signals weakness and pushes customers into the arms of competitors. At the same time, loans finance a wide range of borrowers—manufacturers, farmers, traders, real estate developers, individuals—and with that breadth comes exposure to defaults. Because banks borrow short and lend long, every failure to repay erodes their ability to meet obligations to depositors and other creditors. The portfolio is therefore the most illiquid and the most risky element of banking operations, and its performance determines whether a bank thrives or stumbles.
Given these stakes, effective lending cannot be left to ad hoc judgment. It requires an articulated, written lending policy that sets out the bank’s philosophy, objectives, and the mechanics of implementation, monitoring, appraisal, and review. Such a policy acts as a signpost for management and lending officers, guiding decisions on risk assessment and interest rate exposure. When well conceived, it ensures that credit creation supports profitability and liquidity while remaining aligned with the objectives of the bank, the government, and the community it serves. Without this discipline, lending drifts from a strategic function into a source of unmanaged risk.
Regulators understand this, which is why a lending policy is one of the first documents examiners call for and why its quality is often taken as a proxy for management competence. The Deposit Insurance Fund and bank examiners scrutinize it closely because a sound policy is the clearest evidence that a bank knows how to balance its pursuit of profit with its obligations to depositors and the wider economy. In the end, lending is not just about moving money from savers to borrowers. It is about doing so in a way that maximizes the bank’s goals without undermining the stability it is meant to uphold.
When the Fight for the Top Left Them With Bloody Noses
The race to be Nigeria’s biggest bank has always been pitched as a battle for prestige, market share, and investor confidence. For years, CEOs staked their legacies on aggressive lending, rapid expansion, and balance sheet growth that would put them ahead of rivals. The prize was clear: higher earnings, stronger brand recognition, and a seat at the table in Nigeria’s economic restructuring. But the fight for “highest” has a cost, and between 2024 and 2025 several of the industry’s biggest names came out of it with bloody noses.
The trigger was simple. When the Central Bank of Nigeria ended forbearance and forced full recognition of bad loans, the lending portfolios that had fueled growth suddenly turned toxic. Banks that had chased size over prudence saw earnings hollowed out as impairments spiked. The loan book—the highest earning asset and the riskiest—exposed the gap between reported book value and real, loss-absorbing capital. CEOs who had celebrated rapid credit expansion now faced a market asking a different question: how much of that growth was real, and how much was built on forbearance?
The fallout was immediate. Profitability collapsed in some cases, capital ratios tightened, and investor confidence wavered. Regulatory intervention followed, with boards dissolved and banks placed under judicial and supervisory processes. For CEOs, the personal cost was reputational. In banking, where a good banker is defined as a shrewd lender, a wave of bad loans is a direct indictment of judgment and risk culture. The same lending function that once guaranteed rapid promotion and high salaries became the source of public scrutiny and career setbacks.
The implications go beyond individual reputations. When big banks take heavy hits, the message to the market is that size alone is not a shield against bad lending. It reinforces the old lesson that capital adequacy matters more than balance sheet bloat, and that a written, enforced lending policy is not a compliance box but a survival tool. It also puts the regulator under pressure. The CBN’s delayed but eventual action showed that forbearance has a limit, but the long period of tolerance raised questions about why systemic risks were allowed to fester in the first place.
For the industry, the lesson is uncomfortable but necessary. The battle for “highest” rewards aggressive growth, but it punishes the absence of discipline. CEOs who win that battle will be those who treat lending as a managed risk, not a race for market share. The rest will keep coming out with bloody noses—and in banking, the market rarely forgets who bled first.
Zenith Bank entered 2025 carrying the largest single forborne exposure among the FUGAZ banks at $910M, and the forced cleanup coincided with the disappearance of the 2024 FX windfall. Foreign exchange gains fell nearly 90%, stripping away a major profit cushion just as the bank had to absorb massive impairments. The result was that deferred losses weighed directly on potential earnings, preventing what would have been a higher PAT. Without the baggage of forbearance, Zenith’s 2025 profit would likely have exceeded ₦1.04tn, and the cleanup acted as a drag on what was otherwise a strong operating year.
The bank managed this by leaning on its core lending engine and cost discipline. Interest income rose 35% to ₦3.7tn and net interest income jumped 53% to ₦2.64tn, while digital banking and fee income held up. By growing the operating base, Zenith absorbed the impairment hit and held PAT flat at ₦1.04tn, showing that scale and efficiency can cushion a forced balance-sheet reset.
GTCO faced a different set of pressures. With only $60M in forborne loans, it largely avoided the impairment wave that hit peers, but the reversal of the ₦517.5bn fair-value and FX gain recorded in 2024 created a sharp earnings gap. The cautious credit environment compounded the problem, and PAT fell to ₦865.75bn from ₦1.01tn despite stronger underlying business. Interest income rose 23.2% and fee income 25.9%, yet the absence of one-off gains made 2025 look weaker than the operational trend suggested.
GTCO responded by running away from loan growth and shifting heavily into treasury securities, using the high-yield environment to protect margins. It also doubled down on digital infrastructure, boosting e-business income. The strategy reduced risk and impairment costs but capped upside, revealing a deliberate trade-off between safety and growth.
Access Holdings took the opposite route. It had $535M in forborne loans and the largest asset and revenue base in the group at ₦5.52tn gross earnings, but converting that scale into profit proved difficult once the cleanup began. Impairment charges surged 209%, and while FX income grew 40.3% to ₦1.23tn and transaction volumes expanded rapidly, PAT only reached ₦743bn. The outcome showed that size alone does not guarantee profit conversion when credit costs spike.
Access managed the challenge by leaning on transaction volumes, digital expansion, and trading income to keep earnings rising. It took the impairment hit upfront, cleaned the book, and still posted profit growth while peers fell. The approach worked in the short term, but 2025 also exposed the limits of relying on volume and fee income when impairments surge.
UBA faced a sharper squeeze. With $771M in forborne loans, it was hit by a ₦140.6bn net FX loss that reversed 2024’s gains, and operating expenses rose 70.8%, compounding the pressure. PAT fell to ₦404bn from ₦766bn, the second steepest drop in the group. The combination of forbearance unwinding and FX reversal made clear how much of 2024’s profit was timing-driven rather than sustainable lending income.
UBA managed by maintaining strong net interest income through high-yield corporate lending and large-scale financing. It absorbed the impairment and FX hit in a single year, avoiding a spread-out drag, and entered a capital restoration plan aimed at resetting the book quickly and rebuilding from a cleaner base in 2026.
FirstBank carried the heaviest baggage of all. Its $848M in forborne loans, combined with exposure to the $2bn Nestoil single obligor breach flagged by the CBN in 2025, meant that the end of forbearance forced immediate recognition of years of deferred losses. Loan impairment charges jumped to ₦710bn from ₦371bn, and FX gains collapsed 90.8% as the naira stabilized. PAT collapsed to ₦52bn from ₦663bn, the steepest drop in the group, and the CBN imposed dividend and bonus suspensions.
The profitability wipeout was not due to a failure of the core business, but to the concentration of deferred losses in a single year. The episode exposed how much of FirstBank’s 2024 earnings were accounting-driven. The bank responded by accelerating the cleanup, booking the full impairment hit in 2025, submitting a capital restoration plan, and beginning to unwind the single obligor breaches. Interest income remained strong on the back of high yields, indicating the lending franchise was intact. By taking the pain upfront, FirstBank avoided spreading the damage over multiple years and entered 2026 with a cleaner book, even if 2025 earnings took the brunt.
Across the group, the pattern is consistent. Forbearance masked risk and flattered 2024 earnings, its resolution in 2025 triggered sharp impairments and FX reversals, and each bank managed the fallout differently. Zenith relied on core lending and efficiency, GTCO opted for safety over growth, Access leaned on volume and digital income, while UBA and FirstBank absorbed the hit upfront to reset faster.
