CPPE Flags Weak SME Lending As Recapitalisation Of Nigeria Banks Closes

As Nigeria’s banking sector recapitalisation programme draws to a close tomorrow March 31, 2026 the Centre for the Promotion of Private Enterprise (CPPE) has raised concerns over weak credit flow to the real economy, noting that credit to small and medium enterprises (SMEs) is alarmingly low.
Chief Executive of the CPPE, Dr Muda Yusuf while commending the Central Bank of Nigeria (CBN) for an orderly, non-disruptive and confidence-enhancing recapitalization exercise noted that SME credit in Nigeria accounts for only about one per cent of total credit, lower than the average of about five per cent in sub-Saharan Africa.
This, he said, “represents one of the most significant weaknesses in Nigeria’s financial architecture” adding that “priority must shift from capital adequacy to economic impact. Nigeria needs not just stronger banks, but banks that work for the economy.”
Yusuf noted that the recapitalisation drive, which is concludes tomorrow, Tuesday March 31, 2026, has seen 32 banks meet the new minimum capital requirements as at March 27, 2026, with no reported cases of depositor losses, forced mergers, job cuts or erosion of shareholder value.
“This marks a significant improvement over past consolidation episodes and reflects stronger regulatory capacity, improved market discipline and greater resilience within the banking system.”
While applauding the milestone, the CPPE stressed that the real test of the reform lies in its impact on the broader economy, warning that financial intermediation remains weak despite stronger bank balance sheets.
According to him, “this is particularly troubling given that SMEs contribute approximately 50 per cent of GDP and over 80 per cent of employment, with an estimated financing gap of about N48 trillion” yet they only get about one per cent of credit.
“A large proportion of bank lending remains short-term in nature. Credit with maturity of less than one year accounts for about 55 per cent of total credit, while long-term credit (above three years) accounts for only about 25 per cent. This structure is not aligned with the financing needs of critical sectors such as manufacturing, agriculture, infrastructure and real estate.
“In addition, the sectoral allocation of credit remains skewed. The services sector accounts for about 55 per cent of total credit, while manufacturing receives about 14 per cent and agriculture just five per cent. This pattern is inconsistent with Nigeria’s aspirations for economic diversification, industrialisation and job creation.
“The ultimate success of this reform will be determined not just by stronger balance sheets, but by the extent to which the banking system supports investment, enterprise, job creation and economic transformation” he stated.
The CPPE Chief attributed the disconnect to several factors, including the crowding-out effect of high government borrowing, tight monetary policy conditions, elevated interest rates, and stringent collateral requirements that limit access to credit for SMEs.
Looking ahead, he urged the CBN and fiscal authorities to shift focus to deepening financial intermediation, calling for targeted reforms to boost credit delivery to the real economy. He also urged that private sector credit should be increased to at least 30 per cent of GDP in the medium term.