The Central Bank of Nigeria (CBN) has directed banks to conduct a comprehensive stress test on their credit portfolios beginning from April 1, 2026, as part of measures to ensure the continued stability of the nation’s banking system.
According to the report by Vanguard newspaper on Monday, the instruction forms part of routine regulatory oversight aimed at strengthening the resilience of the financial system.
The Nigerian apex bank stated that the directive aligns with the provisions of Sections 13 and 63 of the Banks and Other Financial Institutions Act 2020, which empowers the CBN to require banks to maintain capital considered adequate to cover risks arising from their operations.
“This is without prejudice to the contents of the CBN ‘Guideline on Stress Testing for Nigerian Banks’ issued in March 2019,” the CBN said in the letter.
It explained that banks are required to assess the resilience of their loan portfolios over a 12-month period under simulated adverse conditions.
“Banks are expected to stress the resilience of their credit portfolio over a 12-month period by simulating deterioration in asset quality, governance risk and significant change in industry dynamics such as fall in commodity prices, foreign exchange rate movement, structural shift in obligor operating market dynamics (supply chain disruption, contracting demand, etc.), portfolio variables, among others,” the CBN said.
It added that the exercise is aimed at determining the potential impact of adverse conditions on banks’ Non-Performing Loans (NPLs), loan loss provisions and Capital Adequacy Ratio (CAR).
GIK/APA