CPPE Flags Weak Credit Allocation Despite Bank Recapitalisation in Nigeria

The Centre for the Promotion of Private Enterprise (CPPE) has raised concerns over persistent structural weaknesses in Nigeria’s credit system, warning that despite a successful bank recapitalisation exercise, lending remains skewed and largely disconnected from productive sectors.

The think tank stressed that stronger bank balance sheets must now translate into meaningful support for the real economy.

In a policy brief released on Sunday, and signed by Chief Executive Officer Muda Yusuf, CPPE commended the Central Bank of Nigeria (CBN) for executing a smooth and orderly recapitalisation programme.

What the think tank is saying 

While the recapitalisation has strengthened the banking sector’s resilience, CPPE warned that Nigeria’s financial intermediation remains weak, with private sector credit at just 17% of GDP in 2025—well below the sub-Saharan African average of 25% and the 34% benchmark for lower-middle-income countries.

• “Credit with maturity of less than one year accounts for about 55% of total credit, while long-term credit (above three years) accounts for only about 25%.” 
• “This structure is not aligned with the financing needs of critical sectors such as manufacturing, agriculture, infrastructure and real estate,” CPPE stated.

CPPE stated that consumer credit accounts for only 7 percent of total lending, below the 15–25% regional range.

• Small and medium enterprises (SMEs), CPPE noted, receive just 1% of total bank credit, compared to a regional average of 5%, despite contributing roughly 50% of GDP and over 80% of employment.
• Approximately 55% of bank lending is short-term (less than one year), while long-term credit above three years accounts for only 25%.
• Sectoral allocation favors services (55% of total credit), with manufacturing and agriculture receiving just 14% and 5%, respectively.

The CPPE highlighted that this imbalance constrains financing for capital-intensive sectors such as manufacturing, agriculture, infrastructure, and real estate, undermining economic diversification and industrialisation goals.

More Insights

The CPPE identifies structural barriers that continue to limit the impact of banking sector strength on the real economy:

• High government borrowing crowding out private sector credit
• Tight monetary policy and elevated interest rates
• Stringent collateral requirements and high perceived risks, especially for SMEs
• Incentive structures favoring short-term, low-risk investments over long-term productive lending

CPPE emphasized that policy focus must now shift from recapitalisation to improving financial intermediation and ensuring credit flows effectively into productive sectors.

What you should know

The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, recently disclosed that 32 banks in Nigeria have already met the revised minimum capital requirements under the ongoing recapitalisation programme.

The CBN earlier said that Nigerian banks mobilised a total of N4.61 trillion in fresh capital under its ongoing recapitalisation programme, reflecting strong investor appetite and growing foreign participation in the sector.

The CBN noted that the recapitalisation exercise is already yielding measurable outcomes, particularly in terms of improved investor confidence and regional expansion by Nigerian banks.