Yemisi Izuora
The Centre for the Promotion of Private Enterprise (CPPE), has said that recapitalisation of Banks as implemented by the Central Bank of Nigeria (CBN) has significantly strengthened the capacity of banks to absorb shocks, support large-ticket transactions and enhance financial system stability.
The CPPE Chief Executive Officer (CEO) Dr. Muda Yusuf in a brief note shared with Oriental News Nigeria, commended the CBN for the successful implementation of the bank recapitalisation programme as the exercise draws to a close.
This he said marks a significant milestone in the ongoing effort to strengthen the resilience, stability and capacity of the Nigerian banking system.
The exercise has been notably orderly, non-disruptive and confidence-enhancing. Evidence indicates that 32 banks have already met the new minimum capital requirements fas at Friday 27th March 2026, with no reports of depositor losses, forced mergers, job losses 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.
This outcome is commendable and represents a major milestone in Nigeria’s financial sector reform journey.
He however demanded to know whether this stronger banking system will sufficiently support the real economy as evidence suggests that this linkage remains weak.
Private sector credit as a percentage of GDP in Nigeria is still only about 17 per cent as of 2025, compared to a sub-Saharan African average of about 25 per cent and approximately 34 per cent for lower-middle-income countries. Peer economies such as South Africa (57.5%), Mauritius (69.8%) and Cape Verde (66.3%) demonstrate significantly stronger financial intermediation.
This gap underscores a persistent structural disconnect between the financial system and productive sectors of the economy.
Yusuf, pointed out that the situation is even more concerning when disaggregated across key segments of the economy.
Consumer credit in Nigeria remains extremely low at about 7 per cent of total credit, compared to a sub-Saharan African average of 15–25 per cent.
This weak consumer credit environment constrains domestic demand and limits growth prospects across multiple sectors.
More critically, credit to small and medium enterprises (SMEs) is alarmingly low. SME credit accounts for only about 1 per cent of total credit, compared to an average of about 5% in sub-Saharan Africa.
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 ₦48 trillion [according to PWC].
This represents one of the most significant weaknesses in Nigeria’s financial architecture.
There are also important structural concerns regarding the nature and distribution of credit in the economy.
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% of total credit, while manufacturing receives about 14% and agriculture just 5%. This pattern is inconsistent with Nigeria’s aspirations for economic diversification, industrialisation and job creation.
He said recapitalisation programme has successfully strengthened the resilience and stability of Nigeria’s banking system and the Central Bank of Nigeria deserves commendation for delivering a reform process that has been both effective and non-disruptive.
However, he stressed that 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.
At this critical juncture, the priority must shift from capital adequacy to economic impact as Nigeria needs not just stronger banks, but banks that work for the economy.