CPPE: Bank recapitalisation strengthens lenders, but real economy still starved of credit

THE Centre for the Promotion of Private Enterprise (CPPE) has commended the Central Bank of Nigeria (CBN) for successfully executing the country’s bank recapitalisation programme, describing the exercise as orderly, non-disruptive and confidence-boosting.

In a policy brief released on Sunday and signed by its Chief Executive Offier, Dr Muda Yusuf, the private sector advocacy group said the recapitalisation marks a major milestone in Nigeria’s financial sector reform, noting that 32 banks had met the new minimum capital requirements as of March 27, 2026. According to the CPPE, the process was completed without depositor losses, forced mergers, job cuts or erosion of shareholder value, an outcome it says reflects stronger regulatory oversight and improved market discipline.

However, despite the strengthened capital base of banks, the CPPE warned that the financial system remains weakly connected to the real economy, raising concerns about the effectiveness of credit delivery to productive sectors.

The group noted that private sector credit in Nigeria stands at about 17 percent of the gross domestic product (GDP) as of 2025, significantly below the sub-Saharan African average of 25 percent and 34 percent for lower-middle-income countries. It added that peer economies such as South Africa, Mauritius and Cape Verde have far stronger levels of financial intermediation.

The report highlighted severe credit constraints across key segments of the economy. Consumer credit accounts for just 7 percent of total lending, compared to 15 percent–25 percent across sub-Saharan Africa, limiting domestic demand. Even more concerning, credit to small and medium enterprises (SMEs) represents only about 1 percent of total credit, despite the sector contributing roughly half of Nigeria’s GDP and over 80 percent of employment. The CPPE cited an estimated SME financing gap of N48 trillion.

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It also pointed to structural weaknesses in credit allocation, noting that about 55 percent of bank lending is short-term, while only 25 percent is long-term, an imbalance that undermines financing for sectors such as manufacturing, agriculture, infrastructure and real estate. Sectoral distribution remains skewed, with services receiving about 55 percent of total credit, compared to 14 percent for manufacturing and just 5 percent for agriculture.

According to the CPPE, several factors are responsible for the disconnect, including high government borrowing that crowds out private sector access to funds, tight monetary policy conditions, elevated interest rates, and stringent collateral requirements that limit SME access to credit.

The organisation urged policymakers to prioritise a new phase of reforms aimed at deepening financial intermediation and improving credit flow to the real economy. It recommended measures such as increasing private sector credit to at least 30 percent of GDP, de-risking SME lending through credit guarantees, incentivising long-term financing, and promoting a more balanced sectoral allocation of credit.

The CPPE also called for improved monetary policy transmission and expanded access to consumer credit to stimulate economic activity.

“The recapitalisation programme has strengthened the resilience of the banking system, but the real test lies in its impact on investment, job creation and economic transformation,” said Yusuf.

He added that Nigeria must now shift focus from capital adequacy to economic impact, stressing that the country needs “not just stronger banks, but banks that work for the economy.”

Thirty-two banks meet recapitalisation

Last week, Governor of the Central Bank of Nigeria, Olayemi Cardoso, disclosed that 32 banks had already met the new capital requirements under the ongoing recapitalisation programme, ahead of the March 31, 2026 deadline.

Speaking in Abuja at the Monetary Policy Forum, Mr Cardoso said, “The banking sector recapitalisation programme has recorded commendable progress, with 32 banks having already met the revised capital requirements. This achievement has significantly strengthened the resilience and capacity of the Nigerian banking system, positioning it to effectively mobilise long-term capital, support productive investment, and play its critical role in enabling the transition towards a $1.0tn economy.”

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The CBN chief disclosed that Nigerian banks had attracted N4.61 trillion in fresh capital following the apex bank’s recapitalisation drive, with 27 percent of the capital raised by foreign investors.

“Nigerian banks in spite of navigating subsidy removals and exchange rate reforms, attracted N4.61 trillion in new capital; nearly 27 percent from foreign investors, while also expanding their footprint across African markets.”

Cardoso further said that as financial systems across the continent become increasingly interconnected, regulators must strengthen collaboration to manage cross-border risks.