Nigerian banks cut lending to oil and gas, ICT and six other key sectors by N5.45 trillion a 14.8 per cent year-on-year drop in 2025 after the Central Bank of Nigeria withdrew regulatory forbearance and forced lenders to clean up their loan books.
Regulatory forbearance let banks restructure bad loans and stay in business even when they breached capital or asset-quality rules. The CBN used it to prevent bank failures and credit crunches during economic crises.
By the first quarter of 2025, seven major banks held $4.01 billion — over N6 trillion — in forbearance loans. These represented high-risk exposures and breaches of the Single Obligor Limit that the CBN had temporarily allowed. When the CBN pulled the policy, banks had to pay up, leaving them with far less room to lend.
Where the cuts hit
CBN data show credit to eight sectors fell to N31.31 trillion in 2025, down from N36.77 trillion in 2024.
General Services took the biggest hit, dropping 25.02 per cent to N4.35 trillion from N5.80 trillion — a N1.45 trillion loss. Manufacturing credit fell 22.52 per cent to N6.61 trillion from N8.53 trillion, wiping out N1.92 trillion.
Real Estate lending dropped 17.2 per cent to N792.71 billion from N957.38 billion. Oil and Gas (Services) fell 12.35 per cent to N4.85 trillion, while Oil and Gas (Industry) dropped 8.77 per cent to N10.59 trillion.
ICT lending fell 7.51 per cent to N1.76 trillion. Education dropped 5.73 per cent to N84.13 billion. Construction slipped 3 per cent to N2.29 trillion.
Tunde Abioye, Head of Equity Research at Quest Merchant Bank, blamed the CBN’s forbearance withdrawal directly. He said the policy forced banks to write off troubled loans, shrinking their overall loan books — with oil and gas and manufacturing hit hardest.
“Banks will tighten their risk management frameworks and credit approval processes. There will be increased scrutiny of prospective loans,” Abioye said.
Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co, agreed the write-offs from ending forbearance shaped the industry’s loan book. He added that improved forex market liquidity reduced demand for trade loans — a key driver of manufacturing sector lending.
MAN says it’s deeper than clean-up
The Manufacturers Association of Nigeria pushed back on the clean-up explanation, insisting the 22.5 per cent drop in manufacturing credit points to deeper structural problems threatening Nigeria’s industrialisation drive.
MAN Director-General Segun Ajayi-Kadir called the contraction disturbing. He noted that while manufacturing credit fell N1.92 trillion, countries like India and Vietnam are deliberately expanding industrial lending — widening Nigeria’s competitiveness gap.
MAN pointed to high lending rates, tough banking conditions, elevated Cash Reserve Ratio, the CBN’s suspended development finance interventions, and delays in rolling out the promised N1 trillion Manufacturing Stabilisation Fund.
Manufacturers still face average prime lending rates of 27 per cent and maximum rates above 35 per cent — rates MAN says make factory investment commercially unviable. Banks’ growing preference for low-risk financial assets over productive sectors has made things worse, the association said.
MAN warned the credit squeeze could cut capacity utilisation, delay technology upgrades, trigger factory closures and job losses, deepen import dependence, and worsen supply-side inflation. It could also derail the Nigeria Industrial Policy and efforts to diversify away from oil.
The association is calling on the CBN and Federal Government to cut interest rates further, lower CRR for banks that support manufacturers, recapitalise the Bank of Industry, activate the N1 trillion Stabilisation Fund, and introduce government-backed credit guarantees.
Winners: agric, finance, and “others”
While eight sectors lost ground, banks pumped N11.42 trillion in additional credit into agriculture, finance and other sectors.
Agriculture credit rose 26.4 per cent to N3.61 trillion. Finance, Insurance and Capital Market lending jumped 19.29 per cent to N9.24 trillion.
The biggest surge came from the “Others” category, which exploded 722.19 per cent to N9.11 trillion from N1.11 trillion — accounting for N8.01 trillion, or roughly 70 per cent of all additional credit extended to growing sectors.
Government borrowing rose 13.51 per cent to N3.27 trillion. Power and Energy lending climbed 31.29 per cent to N1.49 trillion. Transportation and Storage grew 18.12 per cent to N1.77 trillion.
Abioye tied the finance sector’s growth to high interest rates. “Banks and other financial institutions, including pension funds and asset management companies, have benefited greatly from the level of interest rates,” he said, adding that finance remains one of the economy’s best-performing sectors, posting double-digit GDP growth.
Olubunmi expects lending to rebound in 2026 now that the portfolio clean-up and bank recapitalisation exercises are complete. Abioye predicts banks will redirect credit toward telecoms, ICT, manufacturing, oil and gas, real estate and construction as growth prospects improve.
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