Banks Slash Lending, Cut N5.4trn Across Key Sectors

You might be wondering what happened to all that money. Well, Deposit Money Banks (DMBs) slashed lending to oil and gas, information and communication technology (ICT) and six other key sectors of the economy by N5.45 trillion or 14.8 per cent, year-on-year (YoY), in 2025.

Banks in Nigeria have cut lending to key sectors by N5.4trn, leaving manufacturers and businesses reeling. The Central Bank of Nigeria's withdrawal of regulatory forbearance is to blame.

Tunde Abioye, Head of Equity Research at Quest Merchant Bank, explained that the contraction in lending is due to the CBN's decision to end regulatory forbearance on troubled loans. “The major reason for the decline in loans to certain sectors was the removal of regulatory forbearance on challenged loans by CBN. This lifting of forbearance resulted in sizable write-offs of loans by banks, which ultimately resulted in a contraction in banks’ and the industry’s loan book.”

Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co, corroborated this position, saying “The industry loan book was largely shaped by the write-offs associated with the forbearance termination.”

Manufacturers Association of Nigeria (MAN) Director-General, Segun Ajayi-Kadir, warned that the sharp decline in manufacturing credit threatens Nigeria's industrialization drive. MAN attributed the development to prohibitively high lending rates, stringent banking conditions, elevated Cash Reserve Ratio (CRR), the CBN's suspension of direct development finance interventions, and the delayed implementation of the proposed N1 trillion Manufacturing Stabilization Fund.

### Sectors Affected

According to the latest CBN data on Deposit Money Banks’ Sectoral Distribution of Credit, the credit to the eight sectors declined to N31.31 trillion in 2025 from N36.77 trillion in 2024. General Services recorded the steepest decline with credit falling by 25.02 per cent to N4.35 trillion from N5.80 trillion. Manufacturing followed with a 22.52 per cent decline as credit dropped to N6.61 trillion from N8.53 trillion.

### Consequences

The contraction in lending has significant implications for the economy. Manufacturers continue to face average prime lending rates of about 27 per cent and maximum lending rates exceeding 35 per cent, making long-term investments commercially unviable. MAN warned that this development threatens Nigeria's industrialization drive.

### Key Facts:

  • Banks cut lending to key sectors by N5.4trn in 2025
  • The Central Bank of Nigeria's withdrawal of regulatory forbearance is the main reason for the decline in lending
  • General Services recorded the steepest decline with credit falling by 25.02 per cent
  • Manufacturing declined by 22.52 per cent with credit dropping to N6.61 trillion from N8.53 trillion
  • Manufacturers face average prime lending rates of about 27 per cent and maximum lending rates exceeding 35 per cent
  • MAN warned that the sharp decline in manufacturing credit threatens Nigeria's industrialization drive