The Central Bank of Nigeria (CBN) has reported a rise in secured loan defaults in the third quarter of 2025, signalling growing repayment challenges among borrowers with collateral-backed facilities such as homes, vehicles, and other assets.

However, the report shows that unsecured loan defaults declined, indicating better repayment behaviour among borrowers without collateral.

Despite the increase in secured-loan defaults, banks expanded lending during the period. According to the CBN, financial institutions made more credit available in Q3 2025 than in Q2, reflecting a more positive stance toward lending. Banks attributed the rise in secured-loan non-performing accounts to shifting economic conditions impacting both households and businesses.

Lending Appetite Strengthens as Banks Approve More Loans

The survey indicates that banks increased their willingness to issue secured loans, unsecured loans, and loans to businesses in Q3. This was driven by an improved economic outlook and stronger lending appetite within the banking sector.

Corporate borrowers, covering SMEs, medium-sized businesses, large corporates, and financial institutions, all recorded lower default rates, suggesting healthier loan performance across the business landscape.

Banks also reported that loan approval rates rose across all lending categories, meaning more applicants successfully secured financing compared to the previous quarter.

Interest Rate Spreads Adjust Across Borrower Categories

The CBN noted a slight increase in the spread between household lending rates and the Monetary Policy Rate (MPR) for both secured and unsecured loans, indicating a marginal rise in consumer borrowing costs.

For corporate borrowers, interest rate spreads varied by firm size:

• Medium-sized companies and financial institutions saw reduced spreads, lowering their borrowing costs.
• Small businesses and large corporations faced higher spreads, signalling increased risk premiums applied by lenders.

These adjustments reflect banks’ evolving risk assessments across different borrower groups.