Commercial banks reduced lending to major sectors of Nigeria’s economy by N5.45 trillion within one year as rising borrowing costs and tighter credit conditions prompted lenders to scale back exposure to businesses.
Latest data from the Central Bank of Nigeria (CBN) show that outstanding credit to eight strategic sectors declined between May 2025 and May 2026, reflecting the impact of the apex bank’s monetary tightening measures aimed at curbing inflation.
Among the sectors affected were oil and gas, manufacturing, agriculture, information and communication technology (ICT), construction, transportation and storage, general commerce, and utilities. The oil and gas industry recorded the steepest decline in outstanding loans during the period, followed by significant reductions in manufacturing and ICT lending.
Analysts attribute the contraction to elevated interest rates, increased financing costs and banks’ cautious approach to risk management. They noted that businesses are increasingly postponing expansion plans because of expensive credit, while lenders are becoming more selective in approving new loans.
Reacting to the trend in Lagos, Director-General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, warned that the decline in lending to productive sectors could undermine industrial growth and weaken the country’s economic recovery.
“High lending rates are discouraging investment and limiting the ability of manufacturers to expand production.”
Ajayi-Kadir said manufacturers have continued to struggle with limited access to affordable financing, arguing that sustained reductions in bank credit could affect production capacity, employment and competitiveness within the sector.
Despite the broad decline, banking industry observers noted that a few sectors still attracted modest increases in credit, suggesting that lenders are concentrating on areas considered less risky and more resilient. However, they maintained that stronger lending growth would largely depend on lower inflation, improved macroeconomic stability and a gradual easing of interest rates.
The credit slowdown comes as the CBN continues to maintain a tight monetary stance to contain inflation. While the policy has helped moderate price pressures, economists caution that prolonged restrictions in lending could reduce private sector investment and slow job creation if businesses remain unable to access affordable capital.
Stakeholders have therefore urged policymakers to strike a balance between maintaining price stability and ensuring adequate access to credit for sectors that drive economic growth, warning that sustained investment is essential to boosting productivity and supporting Nigeria’s long-term development.
