Banks Slash N5.45tn Loans to Eight Economic Sectors
A sweeping retreat by Nigerian lenders has stripped N5.45 trillion in credit from eight critical sectors of the economy in the space of a single year, laying bare the cost of the Central Bank of Nigeria’s decision to force banks back to stricter prudential standards. The pullback, drawn from the CBN’s latest data on the Sectoral Distribution of Credit, saw combined lending to those sectors fall by 14.8 per cent to N31.31 trillion in 2025, down from N36.77 trillion in 2024.
The trigger was the apex bank’s withdrawal of regulatory forbearance, a crisis-era concession announced on 20 June 2025 that had allowed banks to carry troubled loans and breach the Single Obligor Limit without immediate penalty. As at the first quarter of 2025, exposures tied up under that window for seven major banks stood at about $4.01 billion, or more than N6 trillion in high risk credit. Once the shield was lifted, lenders were compelled to write down bad assets and clean up their books, shrinking their capacity to extend fresh loans.
The damage was uneven but broad. General Services suffered the steepest fall, down 25.02 per cent to N4.35 trillion from N5.80 trillion. Manufacturing followed with a 22.52 per cent contraction to N6.61 trillion from N8.53 trillion, a loss of N1.92 trillion. Real Estate slid 17.2 per cent to N792.71 billion, while Oil and Gas Services dropped 12.35 per cent to N4.85 trillion and Oil and Gas Industry eased 8.77 per cent to N10.59 trillion. Information and Communication fell 7.51 per cent to N1.76 trillion, Education declined 5.73 per cent to N84.13 billion, and Construction dipped three per cent to N2.29 trillion.
Head of Equity Research at Quest Merchant Bank, Tunde Abioye, tied the slump directly to the policy shift. “The major reason for the decline in loans to certain sectors was the removal of regulatory forbearance on challenged loans by CBN,” he said, noting that the resulting write-offs hit oil and gas and manufacturing hardest. Head of Financial Institutions Ratings at Agusto and Co, Ayokunle Olubunmi, added that improved liquidity in the foreign exchange market had also cooled demand for the trade loans that once fed manufacturing.
For the Manufacturers Association of Nigeria, the numbers point to something deeper than a one off clean-up. Its Director General, Segun Ajayi-Kadir, described the 22.5 per cent drop in factory credit as disturbing, warning that it threatens the country’s industrialisation drive at a time when rivals such as India and Vietnam are deliberately channelling more bank finance into production. The association blamed prime lending rates of about 27 per cent, maximum rates above 35 per cent, an elevated Cash Reserve Ratio and the delayed take-off of the proposed N1 trillion Manufacturing Stabilisation Fund.
Not every sector felt the squeeze. Banks lifted credit to nine other areas by N11.42 trillion, favouring safer, higher yielding assets in a tight money environment where the Monetary Policy Rate sits at 26.5 per cent. Finance, Insurance and Capital Market drew N9.24 trillion, up 19.29 per cent, while Agriculture rose 26.4 per cent to N3.61 trillion. The sharpest jump came in the “Others” category, which surged 722.19 per cent to N9.11 trillion, absorbing roughly 70 per cent of all new credit.
The retreat mirrors a wider slowdown, with Fitch estimating banking sector loan growth cooled to about five per cent in 2025 before an expected rebound above 20 per cent this year on the back of recapitalisation. Olubunmi expects the tide to turn. “With the conclusion of the portfolio clean-up exercise and the recapitalisation of the banks, we anticipate a significant increase in exposure to the crucial sectors of the economy in 2026,” he said.