CBN Tightens Watch On Banks’ Concentrated Lending

The Central Bank of Nigeria (CBN) has warned banks against excessive concentration of loans in particular borrowers, sectors, geographic regions and asset classes, saying such exposures could undermine the resilience of institutions despite the N4.65 trillion raised through the banking sector recapitalisation.

CBN director, Banking Supervision, Dr Olubukola Akinwunmi, stressed the need for banks to strengthen their capacity to identify, measure, monitor and control concentration risks as they enter the post recapitalisation era, noting that a diversified loan portfolio remains a critical defence against financial shocks.

He explained that the Regulation on Large Exposures and Guidelines on Management of Credit Concentration Risk were designed to limit excessive dependence on single obligors, connected counterparties and economic sectors whose distress could materially weaken a bank.

“While capital serves as an important buffer against losses, the first line of defence remains a well diversified and prudently managed loan portfolio,” the Akinwunmi stated.

According to the Nigeria Economic Summit Group (NESG) services sector continued to dominate bank lending, accounting for 58.4 percent of the total bank credit in the first half of 2026, up from 55.7 percent in the first half of 2025.

The NESG noted that Oil & Gas and Non-Oil Industrial sectors accounted for 27.8 percent and 6.7 percent, respectively, while Agriculture received 7.1 percent. Within the productive sectors, relatively smaller shares went to Manufacturing which got 8.3 percent, while construction  and real estate got 4.6 and 1.6 percents respectively.

Akinwumi furthered that banks are required to establish internal exposure limits, conduct periodic stress tests and incorporate concentration risk assessments into their Internal Capital Adequacy Assessment Process (ICAAP).

He warned that heavy exposure to sectors such as oil and gas, agriculture, manufacturing, real estate and foreign exchange could leave banks vulnerable to sector specific shocks, potentially resulting in rising non performing loans, increased provisioning, capital erosion and liquidity pressures.

The new risk based supervisory framework, he added, would further link the level of capital required by a bank to the risks it assumes, meaning institutions with excessive concentration risks could be required to maintain additional capital.

The warning comes as the banking industry completes the recapitalisation programme launched in March 2024, which resulted in approximately N4.65 trillion in fresh capital being mobilised, with 33 licensed banks meeting the revised minimum capital requirements.

He however noted that the recapitalization should not be seen as the end of banking sector reform, saying “recapitalisation provides a stronger foundation, but lasting financial stability depends on how effectively banks combine strong capital positions with sound governance, prudent risk management, and robust regulatory oversight.”