Banks slash lending, cut N5.4trn across key sectors
Deposit Money Banks Reduce Lending by 14.8% in 2025
By Babajide Komolafe
Deposit Money Banks (DMBs) in Nigeria reduced their lending in key sectors, including oil and gas and information and communication technology (ICT), by ₦5.45 trillion, or 14.8% year-on-year in 2025. This decline is attributed to the Central Bank of Nigeria’s (CBN) withdrawal of regulatory forbearance and banks’ loan portfolio clean-up efforts.
Regulatory forbearance allows financial institutions to restructure troubled loans, granting them temporary relief from stringent capital and asset quality requirements. This policy is intended to avert bank failures and credit shortages during economic downturns. As of the first quarter of 2025, approximately $4.01 billion (over ₦6 trillion) was tied up in forbearance loans among seven major banks. The CBN’s withdrawal of forbearance forced banks to address these funds, thereby limiting their ability to issue new loans.
Affected Sectors
Along with oil and gas and ICT, other sectors impacted include construction, education, manufacturing, real estate, and general services. CBN data reveals that total credit to these eight sectors decreased to ₦31.31 trillion in 2025 from ₦36.77 trillion in 2024.
Among these sectors, general services saw the most significant downturn, with credit dropping 25.02% to ₦4.35 trillion from ₦5.80 trillion, a reduction of ₦1.45 trillion. The manufacturing sector followed closely, experiencing a 22.52% decline as credit fell to ₦6.61 trillion from ₦8.53 trillion, equating to a contraction of ₦1.92 trillion.
Further declines in bank credit were reported across other sectors: real estate (down 17.2% to ₦792.71 billion), oil and gas (services fell by 12.35% to ₦4.85 trillion, while the oil and gas (industry) sector decreased by 8.77% to ₦10.59 trillion), information and communication (down 7.51% to ₦1.76 trillion), education (down 5.73% to ₦84.13 billion), and construction (down 3% to ₦2.29 trillion).
Tunde Abioye, Head of Equity Research at Quest Merchant Bank, indicated that the primary cause for the decrease in loans was the CBN’s ending of regulatory forbearance on troubled loans. He noted that this action led to substantial write-offs, constraining the loan books of banks.
Manufacturers Association of Nigeria Response
The Manufacturers Association of Nigeria (MAN) emphasized that the decline in manufacturing credit signals deeper structural challenges facing the sector, beyond the banks’ recent loan clean-up. Segun Ajayi-Kadir, MAN’s Director-General, described the 22.5% contraction in manufacturing credit as alarming, warning it jeopardizes Nigeria’s industrial growth. He criticized high lending rates and banking conditions as barriers to accessing credit, with prime lending rates averaging around 27% and maximum rates exceeding 35%.
Ajayi-Kadir attributed the decline in manufacturing credit to various issues, including the elevated Cash Reserve Ratio (CRR), the CBN’s suspension of development finance interventions, and the delayed launch of a proposed ₦1 trillion Manufacturing Stabilisation Fund.
To address these challenges, MAN urged the CBN and the Federal Government to lower interest rates, reduce the CRR for manufacturers, enhance the Bank of Industry, activate the Manufacturing Stabilisation Fund, and provide government-backed credit guarantees.
Growth in Other Sectors
Despite the overall decline in lending, there were notable increases in credit to agriculture and finance sectors. Lending to agriculture rose by 26.4% year-on-year to ₦3.61 trillion, while credit to finance, insurance, and capital market sectors increased by 19.29% to ₦9.24 trillion.
The “Others” category reflected the most considerable growth, with bank credit soaring by 722.19% year-on-year to ₦9.11 trillion, making up around 70% of the total additional credit. Government credit also saw a 13.51% year-on-year increase to ₦3.27 trillion, while lending to power and energy (industry) rose by 31.29% year-on-year to ₦1.49 trillion.
Looking ahead, Abioye and Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co, expressed optimism for a rebound in lending in 2026 following the completion of portfolio clean-up and banks’ recapitalization. They foresee increased credit allocation to sectors such as telecommunications, ICT, manufacturing, oil and gas, and construction.
