The Central Bank of Nigeria (CBN) has revealed that the capital adequacy ratio (CAR) of the nation’s banking industry fell to 12 per cent in July 2025, following the withdrawal of regulatory forbearance previously granted to financial institutions.
The capital adequacy ratio is a key indicator used to assess the financial strength and resilience of banks. It measures a bank’s capital in relation to its risk-weighted assets, determining its ability to absorb losses and protect depositors’ funds. A higher CAR signifies stronger shock-absorbing capacity and greater financial stability.
According to the CBN’s monthly economic report for July, the industry’s CAR declined by 1.43 percentage points from the previous month’s level. The drop, the report explained, stemmed mainly from the expiration of temporary relief measures that had allowed banks to mitigate the effects of economic challenges on their balance sheets.
Despite the decline, the apex bank emphasized that the ratio remained comfortably above the 10 per cent regulatory minimum, signifying that the sector still maintained adequate capital buffers to absorb shocks from credit and market risks.
The report also highlighted that while the banking sector’s liquidity ratio stayed well above the required threshold, the non-performing loans (NPL) ratio exceeded the prudential limit of 5.0 per cent by 2.8 percentage points.
“The Nigerian banking sector remained broadly stable during the period, as most key financial soundness indicators stayed within prudential benchmarks,” the report stated.
It further added, “The liquidity ratio (LR) strengthened to 62.86 per cent, well above the 30.00 per cent regulatory minimum, reflecting the sector’s strong short-term solvency and capacity to meet maturing obligations. Conversely, the capital adequacy ratio (CAR) declined by 1.43 percentage points to 12.00 per cent, following the withdrawal of the Bank’s regulatory forbearance in June 2025. Nonetheless, it remained above the 10.00 per cent regulatory threshold, underscoring the sector’s continued ability to withstand credit and market shocks.”
On asset quality, the CBN noted that the NPL ratio rose by 2.17 percentage points to 7.80 per cent, surpassing the prudential limit. However, it assured that overall asset quality remained relatively stable, supported by strengthened regulatory oversight and risk-based interventions aimed at preserving systemic stability.
