CBN Readies Naira Defense as Iran War Shakes Markets

.Bars loan defaulters from fresh credit facilities

.Moves against large-ticket borrowers who pose significant risks to financial system stability

James Emejo in Abuja with agency report

The Central Bank of Nigeria (CBN) has prepared contingency measures to stabilise the naira if it comes under pressure due to the crisis in the Middle East.

The Bank’s Deputy Governor Muhammad, Sani Abdullahi, who disclosed this, said the regulator was “ready to step in and smooth the market as much as possible” as investors dump riskier emerging-market assets.

The naira has weakened against the dollar since the start of the conflict, but investors continuing to invest in high-yielding assets like Nigerian bonds have helped support the currency.

The Bank is “ready to step in and smooth the market as much as possible,” Abdullahi told Bloomberg.

Emerging market assets have come under pressure since the start of the US-Israel war against Iran, as investors flock to safe-have assets like the US dollar. The MSCI Emerging Markets Currency Index is heading for its worst monthly loss since late 2024.

Meanwhile, the CBN has ordered commercial banks to withhold further credit advances loan defaulters, particularly large-ticket obligors.

The central bank communicated the directive in a circular to banks and other financial institutions, dated March 12, 2026, and signed by the Director, Banking Supervision, Olubukola Akinwunmi.

The Bank instructed financial institutions to take immediate steps to limit further financial access for customers whose loan facilities have already gone bad.

The move aimed to strengthen credit discipline and protect the stability of the financial system, the apex bank explained.

The circular however, stated that following the directive, any borrower classified as having a non-performing loan and listed in the Credit Risk Management System (CRMS) or in the records of licensed private credit bureaus will be barred from accessing additional credit from banks.

The apex bank noted that the measure specifically targets large-ticket borrowers whose defaulted loans could pose significant risks to banks and potentially threaten the wider financial system.

The CBN said banks must immediately stop granting new credit facilities to such borrowers, adding that the restriction covers all forms of direct credit, including loans and similar financing arrangements.

The central bank said affected borrowers should also be restricted from other banking services that create financial obligations for banks, particularly contingent liabilities such as letters of credit, bankers’ confirmations, performance bonds and advance payment guarantees.

The CBN stressed that the restrictions will apply to borrowers whose credit exposures fall within the definition of “large-ticket obligors” as stated in Clause 3.2(d) of the Prudential Guidelines for Deposit Money Banks.

The Bank further directed banks to strengthen their risk management by demanding additional collateral from the affected borrowers in order to adequately secure their existing loan exposures.

According to the central bank, large-ticket obligors refer to borrowers whose total exposure across the banking system exceeds the Single Obligor Limit. 

It noted that such exposures are considered significant because they can materially affect a bank’s Capital Adequacy Ratio or create systemic risks for the financial sector.

Banks are expected to rely on credit information available in the CRMS as well as data obtained from licensed private credit bureaus when determining the status and exposure levels of borrowers.

The new policy comes amid concerns about rising non-performing loans in the banking sector. 

Recent macroeconomic data released by the CBN indicates that the industry’s Non-Performing Loan (NPL) ratio has climbed to about seven per cent from the acceptable prudential limit of about five per cent.

The CBN had attributed the increase to largely the expiration of regulatory reliefs previously granted on restructured loans. 

Once the relief window closed, several of those loans were reclassified as non-performing, pushing up the industry’s bad loan ratio.

The regulator believes the new restrictions will help curb further deterioration in asset quality while encouraging borrowers to meet their repayment obligations.

The CBN directive came amid the ongoing recapitalisation programme in the banking industry which is expected to be concluded by the end of March 2026.

In a related development, African officials have warned that the sharp rise in oil prices due to the conflict in Iran will challenge monetary policymaking and could hit productivity in key sectors like mining, putting the continent’s ongoing economic recovery in peril.

Central banks ‌from Accra to Luanda have been cutting lending rates in recent months on the back of falling inflation and stable foreign exchange rates, and to spur their economies.

That might be over, for now.

“Periods of heightened uncertainty have become a defining feature of the global economic landscape, challenging central banks worldwide in unprecedented ways,” Uganda’s central bank told Reuters.

The Bank, the only major one in the region that had adopted a cautious stance even before the war broke out, said it will reassess its tools and processes to ensure their effectiveness in the challenging environment.

Angola’s central bank held rates on Thursday after three straight cuts, with Governor Manuel Tiago Dias citing growing ⁠risks.

“These risks stem mainly from a possible prolongation of the war currently being waged in the Middle East, which could affect distribution chains, particularly agricultural inputs and fertiliser,” he said.

Other major central banks will have to reassess, analysts said, with Ghana, Nigeria, Zambia and Kenya expected to halt their easing cycles.

“Central bankers are going to have to look at potential pass-through,” said Razia Khan, chief economist for Middle East and Africa at Standard Chartered, referring to second-round effects of higher oil prices on inflation and other measures.

JPMorgan scaled back its forecasts for rate cuts in Nigeria, Kenya, Ghana and Zambia, citing the crisis. “With the exception of Angola, we have reduced the quantum of rate cuts initially pencilled,” it said ina research note.

Brent futures traded at just under $100 per barrel on Friday, having peaked near $120 earlier in the week.

“If oil averages $100 for a year, we will see foreign exchange reserves decline across most of the continent, and many currencies weaken by 5 per cent,” said Charlie Robertson, head of macro strategy at FIM Partners.

‘Oil surged above $100 a barrel this Monday, and American drivers are already starting to see the impact of this latest Middle East conflict at the pump,

‘Oil surged above $100 a barrel this Monday, and American drivers are already starting to see the impact of this latest Middle East conflict at the pump,

Central banks in Kenya, Nigeria, Ghana and ‌Zambia did ⁠not respond to requests for comment.

The turbulence could undermine the prospects of all economies in the region, including crude oil producers like Nigeria and Angola, said Marie Diron, managing director of global sovereign risk at Moody’s.

“Some African oil exporters may see higher revenues from elevated energy prices, but we do not see this as a net benefit. Global spillovers are likely to slow growth, affecting all countries,” she said.

West African oil exporter Nigeria, where a lack of local refining capacity has typically limited the benefits of higher oil prices, is better prepared this ⁠time with more buffers to cushion the impact.

The government removed petroleum subsidies in 2023, coinciding with its first major refinery, Dangote, starting operations.

“Volatility in global energy markets is already driving increases in domestic prices, including fuel, diesel, cooking gas, and fertiliser,” the finance ministry said.

Net oil importer Kenya has seen bonds drop since the crisis started. But authorities have said fuel stocks are sufficient for ⁠now.

“There’s really no cause for alarm in the short to medium term. We have got security of supply, and we continue to monitor the situation very, very closely,” said Energy Minister Opiyo Wandayi.

Neighbouring Ethiopia has boosted fuel subsidies to cushion consumers. Zambia’s government warned fuel retailers against hoarding petroleum products, saying it had adequate stocks.

The setback will likely dent ⁠a fragile recovery in the region and hit key sectors like mining.

“Fuel prices here may go up and if they go up, they will affect productivity in the mining sector,” Paul Kabuswe, Zambia’s minister for mines, told Reuters, curbing a key source of hard currency.

“Our prayer is that the war should end.”