Recapitalised banks and access to credit

After a successful implementation of the banks’ recapitalisation policy by the Central Bank of Nigeria (CBN), which started in 2024 and ended in March 2026, it is expected that there will be greater access to credit for the real sector of the economy.

Thirty-three banks in different categories were recapitalised as stipulated by the Central Bank of Nigeria (CBN).

The international category was recapitalised with a minimum share capital of N500 billion, the national category with N200 billion and the regional with N50 billion, and altogether they raised a total of N4.65 trillion.

CBN Governor Olayemi Cardoso, at a briefing of the Senate Committee on Banking, Insurance and Other Financial Institutions on the activities of the CBN since the beginning of the year, noted that “with recapitalisation now completed, our focus has shifted towards ensuring that stronger capital translates into improved governance, enhanced risk management and support for productive activities.”

The Chairman of the Committee, Mukhail Adetokunbo Abiru, commended the CBN reforms, including restoring stability in the foreign exchange market and successfully implementing the bank’s recapitalisation.

Mukhail noted that the recapitalisation would only achieve its objectives with banks’ increased lending to productive and critical sectors.

He listed agriculture, manufacturing, infrastructure, technology and small and medium enterprises as the critical sectors that were expected to benefit from banks’ recapitalisation.

Nigeria operates a predominant bank-based financing system whereby banks are the dominant and most important intermediaries that provide a greater proportion of financial services.

Banks are in the money market segment of the financial system, which provides short-term funds generally for a period of one year or less, and commercial banks are at the centre of most money markets as both suppliers and users of funds.

Products in the money market include bank accounts, term certificates of deposit, interbank loans, commercial papers (CPs), bank acceptances (BAs), Treasury bills, bills of exchange and others.

Banks seem to be averse to lending to the real sector of the economy, which had once prompted the CBN in the past (2019) to mandate them to increase their loan-to-deposit ratios or risk a fine and which triggered greater credit flow to the manufacturing sector.

The real sector is the primary driver of national output, which contributes about 60 percent of GDP.

It is the engine and driving force of the economy, which includes manufacturing, agriculture, construction, infrastructure and services.

CBN had noted that the real sector creates more linkages in the economy than any other sector, and it has the capacity to generate high employment and income-generating potential.

The real sector satisfies aggregate demand and is connected to the standard of living of the people and is used to measure the effectiveness of macroeconomic policies.

CBN has continued to implement policies that enhance macroeconomic stability and promote private sector growth and create jobs.

The bank prioritises financial system stability and effectively monitors all banks and financial institutions under its regulatory purview, ensuring the health of banks to maintain the integrity of the financial system and support the real sector.

In an article titled “Supporting Manufacturing For National Empowerment,” which was published in Vanguard newspaper on July 29, 2021, I noted that manufacturing is the essence of the secondary sector of the economy and has the highest multiplier effects.

Manufacturing leads to job creation, urbanisation, poverty eradication, feeding aggregate demand and enhancing the standard of living and is noted as the most important cause of economic growth.

The problems of manufacturing in Nigeria include poor power supply, inflation, high interest rates and lack of access to credit.

Lack of access to credit will lead to reduced manufacturing and capacity utilisation, stagnation of the sector’s contribution to GDP, job losses, supply-side inflation, forex pressures, etc.

Bank credit to the manufacturing sector fell by N1.92 trillion from N8.53 trillion in December 2024 to N6.61 trillion in December 2025. representing a 22.5 percent year-on-year contraction.

In a press report, the Manufacturers Association of Nigeria (MAN) noted that the credit contraction constituted threats to job creation, industrial growth and economic diversification.

There is a need to channel greater credit flow to the real sector of the economy. Banks are expected to show interest in financing real sector projects and encourage local manufacturing.

In January 2025, bank credits to the private sector were N77.38 trillion, and they increased to N78.08 trillion in April, but they dropped to N75.83 trillion in August and further to N75.24 trillion in January 2026.

After CBN reduced the Monetary Policy Rate (MPR) by 50 basis points to 26.50 percent in February 2026, credit to the private sector rose by N380.85 billion, and net domestic credit rose from N109.43 trillion in January to N111.40 trillion, representing an increase of 1.80 percent.

CBN has retained the MPR at 26.50 percent in a cautious move to maintain macroeconomic stability and not to spur inflation, which has thus far been de-escalated to a reasonable extent.

The MPR is the benchmark interest rate that also determines the quantum of credit flow to businesses in the economy.

CBN may further reduce the MPR depending on how the pendulum swings and the local and global outlook, but for now the bank maintains a cautious stand between inflation targeting and promoting growth.

The cost of borrowing is still relatively high, but businesses are optimistic about improved financing conditions that would make it easier for businesses to obtain credit for expansion plans.

Confidence in the economy is strengthening because of the reforms.

The CBN survey report shows positive business confidence as respondents expressed optimism in the overall business outlook in the months ahead.

Nwobu, a chartered stockbroker and business journalist, wrote via [email protected]. Tel 08033021230