The Centre for the Promotion of Private Enterprise (CPPE) has commended the Central Bank of Nigeria (CBN) for the successful implementation of the bank recapitalisation programme, describing the exercise as a major milestone in strengthening the resilience, stability, and capacity of Nigeria’s banking system.
According to the document signed by the CEO of CPPE, Dr Muda Yusuf, the recapitalisation process has been notably orderly, non-disruptive, and confidence-enhancing. As of Friday, March 27, 2026, at least 32 banks had met the new minimum capital requirements, with no reported depositor losses, forced mergers, job losses, or erosion of shareholder value. The Centre noted that this represents a significant improvement over previous consolidation exercises and reflects stronger regulatory oversight, improved market discipline, and a more resilient financial system.
While applauding this achievement, CPPE emphasised that the critical question going forward is whether the strengthened banking system will translate into meaningful support for Nigeria’s real economy. The Centre observed that, despite improved capital buffers, the linkages between banks and the productive sectors of the economy remain weak.
Data indicates that private sector credit as a percentage of GDP in Nigeria stands at approximately 17 per cent as of 2025, significantly below the sub-Saharan African average of about 25 per cent and the 34 per cent benchmark for lower-middle-income countries. In comparison, countries such as South Africa, Mauritius, and Cape Verde record substantially higher levels of financial intermediation, highlighting a persistent structural disconnect in Nigeria’s financial system.
The situation is particularly concerning across key economic segments. Consumer credit remains low at about 7 per cent of total credit, far below the sub-Saharan African average of between 15 and 25 per cent, thereby constraining domestic demand and limiting growth prospects. More critically, credit to small and medium enterprises (SMEs) accounts for only about 1 per cent of total credit, compared to a regional average of approximately 5 per cent. This is despite the fact that SMEs contribute about 50 per cent of Nigeria’s GDP and over 80 per cent of employment, with an estimated financing gap of ₦48 trillion.
CPPE further highlighted structural weaknesses in credit allocation, noting that a significant portion of bank lending is short-term, with about 55 per cent of total credit having a maturity of less than one year, while long-term credit accounts for only about 25 per cent. This structure, the Centre said, is misaligned with the financing needs of key sectors such as manufacturing, agriculture, infrastructure, and real estate. Additionally, credit distribution remains skewed, with the services sector accounting for about 55 per cent of total credit, compared to 14 per cent for manufacturing and just 5 per cent for agriculture.
The Centre identified several factors responsible for this disconnect, including the crowding-out effect of high government borrowing, tight monetary policy, elevated interest rates, heightened risk perception in SME lending, stringent collateral requirements, and incentive structures that favour short-term, low-risk financial investments over real-sector financing.
As the recapitalisation exercise draws to a close, CPPE called on the Central Bank of Nigeria and fiscal authorities to focus on the next phase of reform—deepening financial intermediation and reconnecting the banking system to the real economy. The Centre recommended targeted policy measures, including increasing private sector credit to at least 30 per cent of GDP in the medium term, de-risking SME lending through credit guarantees and improved credit infrastructure, strengthening monetary policy transmission, incentivising long-term financing, promoting balanced sectoral credit allocation, expanding consumer credit, and addressing the crowding-out effects of public sector borrowing.
In conclusion, CPPE reiterated that while the recapitalisation programme has successfully strengthened the banking sector, the ultimate measure of success will be the extent to which banks support investment, enterprise development, job creation, and overall economic transformation.
“The priority must now shift from capital adequacy to economic impact,” the statement noted. “Nigeria needs not just stronger banks, but banks that work effectively for the economy.”
