Nigeria’s banking sector has achieved a key regulatory milestone, but a leading economic policy think tank warns that a significant disconnect threatens to undermine broader economic recovery. The Centre for the Promotion of Private Enterprise (CPPE) said that while 32 banks met the Central Bank of Nigeria’s (CBN) recapitalisation deadline of March 31, the critical challenge now is ensuring this strengthened financial system actively supports the real economy.
In a statement, CPPE Chief Executive Officer Muda Yusuf acknowledged the success of the recapitalisation drive in bolstering bank balance sheets. However, he stressed that the focus must swiftly shift from mere capital adequacy to measurable economic impact, particularly in driving investment, enterprise, and job creation.
The organisation highlighted persistent structural weaknesses in financial intermediation. It noted that lending to small and medium enterprises (SMEs)—which contribute an estimated 50 per cent of Nigeria’s Gross Domestic Product and over 80 per cent of employment—remains critically low. SME credit accounts for only about one per cent of total bank lending in Nigeria, far below the sub-Saharan African average of five per cent. CPPE estimated the financing gap for SMEs at approximately N48 trillion, describing the situation as a “significant weakness” in the nation’s financial architecture.
Broader metrics underscore the concern. Private sector credit as a percentage of GDP was about 17 per cent in 2025, compared to an average of 25 per cent in sub-Saharan Africa and around 34 per cent in lower-middle-income countries. Nations like South Africa, Mauritius, and Cape Verde demonstrate significantly higher levels of financial intermediation.
“The evidence suggests that this linkage remains weak,” the CPPE statement said, adding that the ultimate success of the banking recapitalisation will be determined by the extent to which it translates into improved credit flow for productive activities.
The think tank urged policymakers and banks to prioritise mechanisms that deepen credit access for the real sector, arguing that stronger banks must demonstrably work for the economy to foster sustainable growth and transformation.
