Banking Sector Credit to Economy Hits N111.4 Trillion, Challenges Persist Amid Recapitalisation
With banks now adequately funded following the recapitalisation exercise that concluded last month, credit to both the government and private sector rose slightly in February 2026, reaching the highest level since November 2024. While the recapitalisation is set to strengthen Nigeria's banking foundations, the critical challenge ahead is ensuring that this stronger foundation supports a more dynamic, inclusive, and resilient economy.
Credit Figures Show Modest Growth
According to the latest credit figures released by the Central Bank of Nigeria (CBN), the Nigerian banking industry's lending to the domestic economy increased from N109.42 trillion in January to N111.39 trillion in February, representing a 1.8 per cent rise. This marks the highest level of credit to the domestic economy since November 2024, when total credit stood at N115.57 trillion.
Year-on-year, net domestic credit has risen by 7.8 per cent from N103.36 trillion in February 2025. However, credit to the private sector saw a slight decline of 0.8 per cent from N76.25 trillion over the same period.
SME Lending Remains a Critical Weakness
Dr Muda Yusuf, Chief Executive of the Centre for the Promotion of Private Enterprise (CPPE), commended the CBN for conducting an orderly, non-disruptive, and confidence-enhancing recapitalisation exercise. However, he highlighted a significant concern: Small and Medium-sized Enterprises (SME) credit in Nigeria accounts for only about one per cent of total credit, which is lower than the sub-Saharan African average of approximately five per cent.
Yusuf pointed out that this represents one of the most significant weaknesses in Nigeria's financial architecture. He stressed that priority must shift from capital adequacy to economic impact, emphasizing that Nigeria needs not just stronger banks, but banks that work for the economy.
Currency Outside Banking Sector Declines
Meanwhile, currency outside the banking sector has continued to decline after reaching an all-time high in December 2025. CBN data shows that the amount of cash outside the banking industry peaked at N5.4 trillion in December 2025, but has since been decreasing.
Governor Cardoso Emphasizes Sustainable Growth
In a policy brief in Abuja, CBN Governor Yemi Cardoso noted that sustainable growth depends on a resilient financial system. While acknowledging that Nigeria might now have financial resilience on paper, as demonstrated by the over four trillion naira raised during recapitalisation, he stated that the real test is whether it can deliver in practice.
Recapitalisation Signals Structural Shift
Financial analysts observed that Nigeria's latest banking recapitalisation exercise marks more than a regulatory milestone; it signals a structural shift in how the financial system is designed to support growth, absorb shocks, and compete globally. The exercise compelled banks to raise fresh capital ahead of a firm March 31, 2026, deadline, with about N4.65 trillion mobilised and 33 banks meeting new thresholds.
Experts cautioned that while euphoria surrounds the achievement, the deeper story lies in what this capital means for the economy. Governor Cardoso sought to confront the under-capitalisation of Nigerian banks through this exercise, aiming not only for them to play within Africa but also to participate in the global financial space.
International Investor Participation Highlights Confidence
Dr Yunana Bature, a retired central banker, explained that one of the more telling outcomes of the recapitalisation exercise is the composition of funding. He noted that over a quarter of the capital raised came from international investors, which, in a period marked by currency volatility and tightening global financial conditions, sends a strong signal of confidence in Nigeria's banking sector.
