The Centre for the Promotion of Private Enterprise (CPPE) has commended the Central Bank of Nigeria (CBN) for the successful implementation of the country’s bank recapitalisation programme, describing it as a major milestone in strengthening the nation’s financial system.
In a policy brief issued on Monday, CPPE noted that the recapitalisation exercise, which is nearing completion, has been orderly, non-disruptive, and confidence-boosting.
According to the organisation, at least 32 banks had met the new minimum capital requirements as of March 27, 2026, with no reported cases of depositor losses, forced mergers, job cuts, or erosion of shareholder value.
The group said the outcome reflects improved regulatory capacity, stronger market discipline, and enhanced resilience within Nigeria’s banking sector, marking a significant improvement over previous consolidation exercises.
Despite the progress, CPPE raised concerns about the limited impact of the strengthened banking system on the real economy, warning of a persistent disconnect between financial institutions and productive sectors.
The organisation noted that private sector credit remains low at about 17 per cent of Gross Domestic Product (GDP) as of 2025, compared to an average of 25 per cent in sub-Saharan Africa and about 34 per cent in lower-middle-income countries.
It added that countries such as South Africa, Mauritius, and Cape Verde record significantly higher levels of financial intermediation.
CPPE also highlighted severe credit constraints across key segments of the economy. Consumer credit, it said, accounts for only about 7 per cent of total credit in Nigeria, far below the sub-Saharan African average of between 15 and 25 per cent.
More critically, credit to small and medium enterprises (SMEs) remains extremely low at about 1 per cent of total credit, compared to a regional average of 5 per cent.
The group described this as troubling, given that SMEs contribute roughly 50 per cent of GDP and over 80 per cent of employment, with an estimated financing gap of about ₦48 trillion, citing data from PwC.
The policy brief also pointed to structural weaknesses in credit allocation, noting that about 55 per cent of bank lending is short-term, while only 25 per cent qualifies as long-term financing.
This, it said, does not align with the needs of critical sectors such as manufacturing, agriculture, infrastructure, and real estate.
Sectoral distribution of credit was also described as skewed, with the services sector accounting for about 55 per cent of total lending, compared to 14 per cent for manufacturing and just 5 per cent for agriculture.
CPPE attributed the weak linkage between banks and the real economy to several factors, including high government borrowing, tight monetary policy conditions, elevated interest rates, and stringent collateral requirements for SMEs.
It also cited incentive structures that favour short-term, low-risk financial investments over lending to productive sectors.
Looking ahead, the organisation called on the CBN and fiscal authorities to focus on deepening financial intermediation by reconnecting the banking system to the real economy.
It recommended measures such as increasing private sector credit to at least 30 per cent of GDP in the medium term, de-risking SME lending through credit guarantees, strengthening monetary policy transmission, and incentivising long-term financing for key sectors.
Other recommendations include promoting balanced credit allocation, expanding access to consumer credit, and addressing the crowding-out effects of public sector borrowing.
“The recapitalisation programme has successfully strengthened the resilience and stability of Nigeria’s banking system,” said Dr. Muda Yusuf, Chief Executive Officer of CPPE.
He added that the ultimate success of the reform would depend on how effectively the banking sector supports investment, enterprise growth, job creation, and overall economic transformation.
CPPE stressed that the focus must now shift from capital adequacy to economic impact, noting that Nigeria needs not just stronger banks, but banks that actively support the broader economy.
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