The Central Bank of Nigeria (CBN) has reported an increase in the supply of secured, unsecured, and corporate loans by Nigerian banks during the second quarter of 2026, while loan default rates declined across all lending categories. This is according to the CBN's 2026 Q2 Credit Conditions Survey, released on Wednesday.
Survey Methodology and Key Findings
The survey results are based on weighted responses from lenders, with greater weight assigned to banks reporting more significant changes and to institutions with larger credit market shares. The regulator analyzed the results by calculating net percentage balances—the difference between the weighted balances of lenders reporting that demand was higher versus those reporting that demand was lower.
The survey showed that lenders expanded credit availability for secured loans (net balance -24.2), unsecured loans (-10.5), and corporate lending (-20.4). Demand for credit also increased for secured loans (15.1) and corporate loans (15.2), but declined slightly for unsecured lending (-1.2).
Drivers of Credit Expansion
The CBN attributed the increase in secured lending to an improved economic outlook, favourable liquidity conditions, and banks' market share objectives. Increased availability of funds and market share considerations drove unsecured lending, while tighter wholesale funding conditions, improving economic outlook, and changing sector-specific risks supported corporate credit.
The demand for corporate loans was mainly driven by balance sheet restructuring (net balance 24.0), capital investment (17.0), and inventory finance (12.9).
Interest Rate Spreads and Default Rates
The survey further revealed that the spread between unsecured lending rates and the Monetary Policy Rate (MPR) narrowed to 7.8 index points, while the spread on secured lending widened to -4.5 index points. For corporate lending, spreads narrowed for Other Financial Corporations (14.0), medium private non-financial corporations (5.0), and large private non-financial corporations (4.7), but widened for small businesses (-3.8).
Lenders also reported lower default rates across secured loans (36.2), unsecured loans (9.7), and corporate lending, including small businesses (14.9), medium private non-financial corporations (13.5), large private non-financial corporations (10.7), and Other Financial Corporations (5.9).
Implications for the Nigerian Economy
The increase in credit supply and reduction in default rates signal improved credit conditions in the Nigerian banking sector, which could support economic growth. The CBN's survey indicates that banks are more willing to lend, and borrowers are better able to repay, reflecting a healthier financial environment.
These developments come amid broader economic reforms and monetary policy adjustments by the CBN. The narrowing of spreads on unsecured loans relative to the MPR suggests that banks are becoming more competitive in pricing credit, potentially making borrowing more accessible for consumers and businesses.
However, the slight decline in demand for unsecured loans may indicate cautious consumer sentiment or a shift towards secured borrowing. The CBN's ongoing monitoring through such surveys will be crucial in shaping future monetary policy decisions.
