NIGERIAN commercial banks and deposit money banks’ 17 per cent total lending to businesses, specifically to small and medium enterprises (SMEs), have sparked debates as the Central Bank of Nigeria (CBN) recapitalisation approaches the 31 March deadline.
Available records from the CBN showed that 32 banks have already met the new minimum Capital requirements as of Friday, March 27, 2026.
The exercise has come with no reports of depositor losses, forceful mergers, job losses or erosion of shareholders’ values.
However, economic watchers expressed worry over dwindling lending to small-scale businesses, which are the main drivers of the economy.
The Chief Executive Officer of Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, in response to the development, said while recapitalisation has significantly strengthened the capacity of banks to absorb shocks, the question remains on their capacity to support the real economy through business lending.
“Private sector credit as a percentage of GDP in Nigeria is still only about 17% in 2025, compared to the sub-Saharan African average of about 25% and approximately 34% for lower-middle-income countries.
He added that, “Peer economies such as South Africa(57.5%), Mauritius (69.8%) and Cape Verde(66.3%), demonstrate significantly stronger financial intermediation.”
Affirming further lower credit impact, a report from Price Water Coopers (PWC) revealed that Consumer credit in Nigeria remains low at about 7 per cent of total credit, compared to a sub-Saharan African average of 15-25 per cent.
This weak consumer credit environment, analysts say, constrains domestic demand and limits growth prospects across multiple sectors.
Notably, credit to small and medium enterprises (SMEs) is alarmingly low.
“SME credit accounts for only 1% of total credit, compared to an average of about 5 per cent in sub-Saharan Africa. This is particularly troubling given that we SMEs contribute approximately 50% of GDP and over 80%of employment, with an estimated financing gap of N48 trillion, “PWC reports states further.
The low credit for SMEs, analysts say represent one of the most significant weaknesses in Nigeria’s financial architecture.
Meanwhile, Yusuf further highlighted the negative impact of low consumer credit in Nigeria.
A large proportion of bank lending remains short-term in nature. Credit with maturity of less than one year accounts for about 55 per cent of total credit, while long-term credit (above three years) accounts for only about 25 per cent
Sectoral allocation of credit remains skewed, he said, noting that “The services sector accounts for about 55 per cent of total credit, while manufacturing receives about 14 per cent and agriculture just 5 per cent.
This pattern is inconsistent with Nigeria’s aspirations for economic diversification, industrialisation and job creation.
For Nigerian SMEs, weaknesses at any point in this chain can severely limit growth and sustainability. Unfortunately, multiple structural, institutional, and macroeconomic barriers persist and lending to them has not been appealing to businesses,” an economist, Kingsley Obiakor, told The ICIR.
He expressed worry that the high lending rate to the SMEs, despite the lowering inflation rate, is creating problems for businesses.
Small and Medium-Sized Enterprises (SMEs) remain the backbone of Nigeria’s economy, accounting for the majority of employment, business formation, and non-oil economic activity.
However, despite their importance, SMEs continue to face deep-seated challenges along the financial value chain, from capital formation and access to finance, to payments, risk management and long-term investment.
The financial value chain encompasses all financial interactions that support business growth, which are savings, credit, payments, insurance, investment and capital markets.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.