Nigeria’s banking sector has recorded a notable uptick in credit expansion, with fresh data pointing to a gradual recovery in lending activity following the conclusion of the recent recapitalisation exercise.
Banking Sector Lending Nigeria Rises To N111.4trn Amid Post-Recapitalisation Boost
Latest figures from the Central Bank of Nigeria show that banking sector lending Nigeria climbed to N111.39 trillion in February 2026, reflecting a 1.8 per cent increase from N109.42 trillion recorded in January.
This marks the highest level of total credit to the domestic economy since November 2024, signalling renewed momentum in financial intermediation as banks strengthen their balance sheets and expand lending capacity.
On a year-on-year basis, banking sector lending Nigeria rose by 7.8 per cent from N103.36 trillion recorded in February 2025, highlighting sustained credit growth despite macroeconomic pressures.
Government Borrowing Drives Credit Expansion
A breakdown of the data reveals that the increase in banking sector lending Nigeria was largely driven by a significant rise in credit to the government.
Credit to the public sector surged from N34.18 trillion in January to N35.77 trillion in February, representing a substantial increase and the highest level since late 2024. Compared to the N27.11 trillion recorded in February last year, government borrowing rose sharply by 24.2 per cent.
This trend underscores the continued reliance of fiscal authorities on domestic borrowing to finance budgetary obligations, even as efforts are being made to stabilise public finances.
Analysts note that while increased government borrowing can support public spending, it may also crowd out private sector access to credit if not carefully managed.
Private Sector Lending Shows Modest Growth
Despite the dominance of government borrowing, the private sector continues to account for the largest share of banking sector lending Nigeria.
Credit to businesses and households rose marginally from N75.24 trillion in January to N75.62 trillion in February, maintaining its position as the primary driver of economic activity.
However, on a year-on-year basis, private sector credit declined slightly by 0.8 per cent, suggesting that structural challenges such as high interest rates, inflationary pressures, and foreign exchange volatility continue to weigh on borrowing by businesses.
Economists argue that unlocking stronger private sector growth will be critical to ensuring that banking sector lending Nigeria translates into real economic expansion and job creation.
Experts Raise Concerns Over SME Credit Gap
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, has raised concerns over the disproportionately low level of credit flowing to small and medium-sized enterprises (SMEs).
According to him, SME lending accounts for only about one per cent of total credit in Nigeria—significantly below the average of five per cent observed across sub-Saharan Africa.
He described this gap as a major structural weakness in the financial system, stressing that the focus of banking reforms should extend beyond capital adequacy to economic impact.
“Nigeria needs not just stronger banks, but banks that work for the economy,” he noted, calling for targeted policies to improve access to finance for small businesses.
Recapitalisation Exercise Strengthens Banking System
The recent recapitalisation exercise by the Central Bank of Nigeria has played a crucial role in boosting confidence within the financial system.
By increasing capital buffers, banks are now better positioned to absorb risks, support larger transactions, and expand their lending portfolios.
Industry observers believe that the improved capital base will enable banks to play a more active role in financing infrastructure projects, supporting industrial growth, and driving economic diversification.
The positive trajectory of banking sector lending Nigeria is therefore seen as an early indication of the benefits of the recapitalisation programme.
Decline in Currency Outside Banks Signals Improved Liquidity
In a related development, data from the apex bank indicates a gradual decline in currency held outside the formal banking system.
Cash outside banks, which peaked at N5.4 trillion in December 2025, declined to N5.21 trillion in January and further to N5.20 trillion in February 2026.
This trend suggests improving liquidity conditions within the banking sector, as more funds are channelled into the formal financial system.
However, on a year-on-year basis, currency outside banks still rose by 15.3 per cent from N4.51 trillion, indicating that cash-based transactions remain significant in the economy.
Implications for Economic Growth
The upward trend in banking sector lending Nigeria has important implications for the broader economy.
Increased credit availability can stimulate investment, support business expansion, and drive consumption, all of which are critical to economic growth.
However, the composition of lending will be key. Analysts emphasise that a balanced distribution of credit between the public and private sectors is essential to maximise economic impact.
Excessive government borrowing, if sustained, could limit the ability of banks to support private enterprises, particularly SMEs that are vital for job creation and innovation.
Outlook for Nigeria’s Credit Market
Looking ahead, the trajectory of banking sector lending Nigeria will depend on several factors, including monetary policy direction, inflation trends, and overall macroeconomic stability.
If reforms continue to strengthen the financial system and improve the business environment, lending activity is expected to maintain an upward trend.
However, stakeholders stress the need for deliberate policies to channel more credit to productive sectors of the economy, particularly manufacturing, agriculture, and small businesses.
Ultimately, while the current figures reflect positive momentum, the real test will be whether increased lending translates into inclusive and sustainable economic growth.
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