Loans extended by Nigeria’s commercial and merchant banks dropped to N52.656 trillion in June 2025, the lowest level recorded in 14 months, according to the Central Bank of Nigeria’s (CBN) latest quarterly statistical bulletin.
The figure represents a sharp N2.739 trillion decline from May 2025’s N55.395 trillion — a 4.95% month-on-month contraction — and marks the first time lending fell below N53 trillion since April 2024, when it stood at N51.467 trillion. On a year-on-year basis, the drop was marginal at just N9 billion (less than 0.02%), compared with N52.665 trillion in June 2024.
The slowdown reflects a cautious stance by lenders as the sector navigates the ongoing recapitalisation exercise. The CBN set March 31, 2026, as the final deadline for banks to meet the revised minimum capital requirements, prompting many institutions to prioritise balance-sheet strength over aggressive credit expansion.
Quarterly movements throughout 2025 showed volatility:
– January 2025: N54.153 trillion (up from N53.521 trillion in January 2024)
– February 2025: N53.059 trillion (down from N57.173 trillion in February 2024)
– March 2025: N54.136 trillion (up from N49.614 trillion in March 2024)
Commercial banks, which dominate the lending landscape, provide a wide range of facilities including personal loans, business working capital, equipment financing, mortgages, and consumer credit such as car loans and credit cards. Merchant banks focus on larger-scale financing, including corporate loans, trade finance for import/export activities, project finance for infrastructure and industrial developments, and advisory-linked funding for mergers, acquisitions, and restructurings.
The contraction comes amid rising asset quality concerns in the banking sector. Following the CBN’s withdrawal of regulatory forbearance granted during the pandemic — which had allowed banks to restructure facilities without classifying them as non-performing — the industry’s non-performing loans (NPL) ratio climbed to an estimated 7% in recent months, exceeding the prudential threshold of 5%. The regulator attributed the increase to the crystallisation of previously restructured loans once the relief period expired.
Industry observers say the combination of recapitalisation pressures, elevated NPLs, and tighter risk management has led banks to adopt a more conservative lending posture. This is particularly evident in SME and retail segments, where credit appetite remains subdued despite official calls for banks to support productive sectors.
The decline in lending could have broader implications for economic recovery. With Nigeria’s development financing gap estimated at N230 trillion, reduced credit flows to businesses — especially SMEs — may slow investment, job creation, and overall growth momentum in the near term.
As banks race toward the March 2026 recapitalisation deadline, analysts expect lending patterns to remain cautious until compliance is secured and asset quality stabilises. For now, the N52.656 trillion figure serves as a clear signal: Nigeria’s banking sector is prioritising resilience over rapid expansion, even as demand for credit across the real economy remains high.
