Banks Funnel Cheap Credit to Oil and Gas, Squeeze Agriculture, Manufacturing

Commercial banks in Nigeria are tilting their lending portfolios in favour of the oil and gas sector, offering more competitive credit terms to energy firms while agriculture and manufacturing continue to face relatively higher borrowing costs.

Data released by the Central Bank of Nigeria (CBN) as of March 20, 2026, show that although many lenders maintain a uniform pricing structure across sectors, key differences emerge that put agriculture and manufacturing at a disadvantage compared to oil and gas.

Across several top-tier banks, including Access Bank, Citibank, Ecobank, United Bank for Africa (UBA) and Zenith Bank, lending rates for agriculture and manufacturing are largely identical.

It shows that prime rates typically range between 19.00 per cent and 28.50 per cent, with maximum lending rates stretching to 32.00–35.00 per cent.

According to CBN, the prime lending rate is the interest rate commercial banks charge their most creditworthy customers (usually large corporations), while the maximum lending rate is the highest rate charged to customers with low credit ratings.

These rates are influenced by the monetary policy rate (MPR) or benchmark interest rate, currently at 26.5 per cent, which the CBN uses to rein in inflation.

These same rates are often applied to oil and gas, suggesting a broad-based lending framework, however, this surface-level uniformity masks deeper pricing preferences at some institutions, where oil and gas emerge as a clear beneficiary of cheaper credit.

Oil & gas enjoys a pricing advantage

At Guaranty Trust Bank, one of the country’s leading lenders, the prime lending rate for oil and gas stands at 7.34 per cent, significantly lower than 10.00 per cent for manufacturing and 19.00 per cent for agriculture.

This wide gap highlights a deliberate pricing tilt that favours the energy sector over the real economy.

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A similar pattern is observed at Stanbic IBTC where the bank quotes a prime rate of 36.00 per cent for oil and gas compared to a nominal 1.00 per cent for agriculture and manufacturing, but capped its maximum lending rate for oil and gas at 48.00 per cent, well below the 60.00 per cent ceiling applied to the other two sectors.

This indicates tighter risk controls and potentially more predictable exposure in oil and gas lending. Elsewhere, the divergence is less pronounced but still evident.

Even in cases where banks apply similar rates across sectors, analysts note that oil and gas borrowers often benefit from more favourable loan structures, faster approvals and larger ticket sizes, further reinforcing the sector’s advantage.

Agriculture, manufacturing face higher risk perception

An analysis of the CBN data reveals that the disparity in lending rates underscores a broader issue: agriculture and manufacturing are perceived as higher-risk sectors by banks, despite their importance to economic growth and job creation.

Agriculture, for instance, is heavily exposed to unpredictable factors such as weather conditions, pests and long production cycles.

These uncertainties make it difficult for lenders to accurately assess risk, often resulting in higher interest rates or stricter lending conditions.

Manufacturing faces its own challenges as high operating costs, driven largely by unreliable power supply, foreign exchange constraints and logistics bottlenecks, reduce profit margins and increase the likelihood of loan defaults.

As a result, banks tend to price loans to manufacturers more conservatively.

In contrast, oil and gas companies are seen as more stable and better positioned to meet their debt obligations, a key reason is the revenue structure.

Many firms in the sector earn in US dollars, providing a natural hedge against naira volatility and inflation. This makes their cash flows more predictable and reduces credit risk from the lender’s perspective.

Risk, collateral, returns drive lending bias

Beyond revenue stability, collateral strength also plays a critical role in shaping banks’ preferences.

Oil and gas projects are typically backed by high-value assets and established infrastructure, which can be used to secure loans. This gives lenders an added layer of protection in case of default.

By comparison, agricultural assets are often less tangible or harder to value, while manufacturing equipment may depreciate quickly or be affected by operational disruptions. These factors weaken collateral quality and further elevate perceived risk.

Challenge for real sector financing

However, the trend raises concerns about the flow of credit to sectors considered critical for economic diversification.

While oil and gas continue to attract relatively cheaper financing, agriculture and manufacturing—key drivers of food security and industrialisation—remain burdened by higher borrowing costs.

Although the CBN publishes lending rates weekly to promote transparency, the data highlight a persistent structural imbalance in credit allocation.

With the conclusion of the banks’ recapitalisation programme, experts say the exercise marks a significant milestone in strengthening the resilience and stability of the financial system, raising expectations for increased lending to the real sector.

Pinnacle Daily earlier reported that banks are now to face a real economic test as the recapitalisation exercise ended.

According to a renowned economist. Dr Muda Yusuf, the critical question is whether stronger, better-capitalised banks will translate that capacity into meaningful support for the real economy.

“The recapitalisation programme has successfully strengthened the resilience and stability of Nigeria’s banking system,” however, “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. Nigeria needs not just stronger banks but banks that work for the economy,” he said.