First Holdco Writes Off N27m in Bad Debt as Impairment Charge Rises to N748bn

Contrary to widespread reports, First Holdco Plc did not write off N748 billion as bad debt in 2025. The figure relates instead to an impairment charge recognised under International Financial Reporting Standard (IFRS) 9 on expected credit losses.

Under IFRS 9, banks are required to make forward-looking provisions for potential credit losses, shifting from the traditional “incurred loss” model to an “expected loss” approach. As such, the N748.125 billion represents a non-cash impairment provision aimed at cleaning up the balance sheet, rather than loans definitively written off.

An impairment charge reduces the carrying value of assets on the balance sheet and is recorded in the profit or loss statement. If some of the affected loans are subsequently recovered, the provisions may be written back, boosting future earnings.

First Holdco’s latest results show that group impairment on credit losses surged by 75 per cent year-on-year to N748.125 billion, up from N254.907 billion in 2024. The spike followed the Central Bank of Nigeria’s (CBN) decision to withdraw regulatory forbearance introduced during the COVID-19 crisis.

Many oil and gas firms ran into difficulty in 2020 amid oil contango and the broader economic fallout from the pandemic. Given that the crisis was beyond the control of lenders, the CBN permitted banks to treat their loan books as performing during the period of forbearance.

However, several oil and gas companies, alongside businesses in other sectors heavily exposed to COVID-19 disruptions, were unable to recover. Loan sizes expanded, interest costs climbed and default rates increased significantly.

It is sufficient to say the banking industry’s earnings were practically overstated in the normal course event without the CBN forbearance. Subsequently, foreign exchange gains provided a windfall for some lenders, helping them to moderate expected credit loss risks. First Holdco, however, recorded foreign exchange losses during the period.

A closer look at the group’s financials shows that impairment on loans and advances to customers rose by 91.37 per cent year-on-year to N710.033 billion in 2025, compared with N371.044 billion in 2024.

The breakdown also indicates that First Holdco recovered some offsets previously made on loans to banks in 2024, while provisions charged on certain investment securities were reversed following changes in fair value.

Despite the sharp rise in impairment provisions, actual bad debts written off during the year amounted to just N27 million.

Bad debt written off suggests that the loan has advanced to a stage that may not be recoverable. By contrast, impairment charges under IFRS 9 are precautionary and may be written back in 2026 if recoveries are made.

The distinction is critical for investors assessing First Holdco’s 2025 performance, as the bulk of the N748 billion reflects accounting adjustments rather than realised credit losses.