The Centre for the Promotion of Private Enterprise (CPPE) says Nigeria’s bank recapitalisation has strengthened the financial system, but warns that without increased lending to businesses, the exercise will have little impact on the real economy.
It gave the warning in a statement issued on Sunday, March 29, by its Chief Executive Officer, Muda Yusuf, praising the Central Bank of Nigeria (CBN) for delivering an orderly and non-disruptive recapitalisation process ending Tuesday, March 31.
According to the CPPE, the exercise marks a major milestone in strengthening the resilience and stability of the banking sector, with 32 banks meeting the new minimum capital requirements as of March 27, 2026, without depositor losses, forced mergers, job cuts or erosion of shareholder value.
“This marks a significant milestone in the ongoing effort to strengthen the resilience, stability and capacity of the Nigerian banking system,” Yusuf said.
He maintained that the process was “notably orderly, non-disruptive and confidence-enhancing,” reflecting improved regulatory oversight and stronger market discipline compared to previous consolidation episodes.
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Despite these gains, the CPPE said the key challenge remains whether stronger banks will translate into improved support for the real economy.
Yusuf noted that private sector credit remains low at about 17 per cent of gross domestic product (GDP) in 2025, compared to 25 per cent in sub-Saharan Africa and about 34 per cent in lower-middle-income countries.
“This gap underscores a persistent structural disconnect between the financial system and productive sectors of the economy,” he said.
The group highlighted weak credit access across key segments, noting that consumer credit accounts for about seven per cent of total lending, while SME financing remains critically low at around one per cent of total credit despite the sector’s significant contribution to output and employment.
Yusuf described this as “one of the most significant weaknesses in Nigeria’s financial architecture,” pointing to an estimated ₦48 trillion financing gap for small businesses.
He also raised concerns over the structure and allocation of credit, with about 55 per cent of loans being short-term, while long-term credit accounts for only 25 per cent.
He pointed out that the services sector dominates credit allocation, leaving manufacturing and agriculture with significantly smaller shares.
“This pattern is inconsistent with Nigeria’s aspirations for economic diversification, industrialisation and job creation,” Yusuf said.
He identified high government borrowing, tight monetary policy, elevated interest rates and stringent collateral requirements as key constraints limiting credit expansion, particularly to SMEs.
While acknowledging the success of the recapitalisation exercise, Yusuf stressed that the next phase of reform must focus on translating financial system strength into real economic impact.
“The recapitalisation programme has successfully strengthened the resilience and stability of Nigeria’s banking system,” he said.
However, he added 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,” Yusuf added. “Nigeria needs not just stronger banks, but banks that work for the economy.”
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X
