Nigeria’s banking sector recorded a sharp slowdown in credit extension, with total loans dropping to N52.656 trillion in June 2025, marking the lowest level in 14 months. The decline, highlighted in the Central Bank of Nigeria’s (CBN) latest quarterly statistical bulletin, reflects growing caution among lenders as they navigate stricter regulatory and recapitalisation requirements. Compared to May’s N55.395 trillion, this represents a 4.95% month-on-month contraction, signaling a restrained approach to credit creation.
Industry experts say the decline mirrors the sector’s response to the CBN’s revised minimum capital thresholds, with banks focusing on balance-sheet strength ahead of the March 30, 2026 compliance deadline. While lending was broadly flat on a year-on-year basis, the reduction highlights how banks are balancing the need to support the economy with the imperative to meet regulatory mandates and preserve capital amid uncertainty.
Loan trends in the first half of 2025 have been uneven. After rising to N54.153 trillion in January, lending fell to N53.059 trillion in February, then rebounded in March before weakening again in the following months. Analysts note that these fluctuations underscore the delicate balancing act banks face: extending credit to fuel economic activity while managing capital adequacy and risk exposure in a tightening regulatory environment.
The slowdown is also linked to rising non-performing loans, which have climbed to an estimated seven percent, above the prudential five percent threshold. With the CBN’s withdrawal of pandemic-era regulatory forbearance, banks are increasingly cautious about lending, prioritising asset quality and limiting exposure to high-risk borrowers. Commercial banks, which serve individuals and businesses, and merchant banks, which focus on corporate financing, are both adjusting strategies to conserve capital and reduce risk.
Analysts predict that bank lending in Nigeria is likely to remain subdued in the short term, with any meaningful growth hinging on successful recapitalisation and improved loan performance. As lenders navigate capital raising, regulatory compliance, and rising credit risk, the sector’s cautious approach may continue, shaping the trajectory of economic credit in the coming months.
source: The Sun