Banks Slash Lending by N5.45tn to Oil, Manufacturing, ICT, Six Other Key Sectors

Nigeria’s Deposit Money Banks (DMBs) slashed lending to eight critical sectors of the economy by N5.45 trillion in 2025, following the Central Bank of Nigeria’s (CBN) withdrawal of regulatory forbearance and an industry-wide clean-up of loan portfolios.

Latest data released by the CBN showed that total credit to the affected sectors declined by 14.8 per cent year-on-year, falling from N36.77 trillion in 2024 to N31.31 trillion in 2025.

The sectors hardest hit include oil and gas, manufacturing, information and communication technology (ICT), construction, education, real estate and general services.

The sharp contraction comes after the apex bank ended its regulatory forbearance policy, which had allowed banks to temporarily retain non-performing loans and exceed certain prudential limits while restructuring distressed facilities.

Industry estimates indicate that, as of the first quarter of 2025, more than N6 trillion in regulatory forbearance exposures involving seven major banks had to be resolved following the CBN’s directive, significantly reducing the lenders’ capacity to extend fresh credit.

According to the CBN figures, the General Services sector recorded the steepest decline, with credit dropping by N1.45 trillion or 25.02 per cent to N4.35 trillion. Manufacturing followed closely, losing N1.92 trillion as lending declined by 22.52 per cent to N6.61 trillion.

Real Estate credit fell by 17.2 per cent to N792.71 billion, while lending to Oil and Gas (Services) declined by 12.35 per cent to N4.85 trillion. Credit to Oil and Gas (Industry) also dropped by 8.77 per cent to N10.59 trillion.

Other sectors affected included ICT, where lending declined by 7.51 per cent to N1.76 trillion; Education, which recorded a 5.73 per cent drop to N84.13 billion; and Construction, where credit fell three per cent to N2.29 trillion.

Explaining the development, Head of Equity Research at Quest Merchant Bank, Tunde Abioye, attributed the contraction primarily to the withdrawal of regulatory forbearance.

“The major reason for the decline in loans to certain sectors was the removal of regulatory forbearance on challenged loans by the CBN. This resulted in sizeable loan write-offs by banks and ultimately reduced the industry’s overall loan portfolio. The oil and gas and manufacturing sectors were the worst affected,” he said.

Abioye noted that the development is likely to make banks more cautious in approving new loans, with stricter risk management and credit assessment processes expected going forward.

Supporting the position, Head of Financial Institutions Ratings at Agusto & Co, Ayokunle Olubunmi, said the industry’s loan book was significantly impacted by the write-offs arising from the end of the forbearance regime.

He also pointed to improved liquidity in the foreign exchange market, which reduced demand for trade finance facilities that had previously supported the manufacturing sector.

However, the Manufacturers Association of Nigeria (MAN) argued that the decline in manufacturing credit reflects deeper structural weaknesses rather than just regulatory adjustments.

MAN Director-General, Segun Ajayi-Kadir, described the 22.5 per cent fall in manufacturing lending as alarming, warning that it could undermine Nigeria’s industrialisation agenda.

According to the association, manufacturers continue to grapple with commercial lending rates averaging about 27 per cent, with some facilities attracting interest rates above 35 per cent, making long-term investment increasingly difficult.

MAN also blamed the contraction on stringent lending conditions, the high Cash Reserve Ratio (CRR), suspension of several development finance interventions and delays in implementing the proposed N1 trillion Manufacturing Stabilisation Fund.

The association warned that reduced access to finance could lower factory output, delay technology upgrades, trigger job losses, increase dependence on imports and worsen inflationary pressures.

To reverse the trend, MAN urged the Federal Government and the CBN to lower interest rates, reduce the CRR for banks lending to manufacturers, recapitalise the Bank of Industry, operationalise the N1 trillion Manufacturing Stabilisation Fund and introduce government-backed credit guarantees for the real sector.

Despite the contraction across key productive sectors, bank lending increased significantly in agriculture, finance and several other segments of the economy.

Credit to agriculture rose by 26.4 per cent to N3.61 trillion, while lending to the finance, insurance and capital market sector grew by 19.29 per cent to N9.24 trillion.

The biggest expansion was recorded under the “Others” category, where credit surged by 722.19 per cent to N9.11 trillion, accounting for about 70 per cent of the total increase in lending across the sectors that recorded growth.

Government borrowing also increased by 13.51 per cent to N3.27 trillion, while credit to the power and energy sector rose by 31.29 per cent to N1.49 trillion. Lending to transportation and storage climbed by 18.12 per cent to N1.77 trillion.

Abioye attributed the strong growth in lending to financial institutions to the prevailing high interest rate environment, noting that banks, pension funds and asset management firms have benefited from elevated market yields.

Looking ahead, industry analysts expressed optimism that lending to productive sectors will rebound in 2026 as banks conclude their balance sheet clean-up and complete ongoing recapitalisation programmes.

Olubunmi said the conclusion of the portfolio restructuring exercise would enable banks to significantly increase credit exposure to strategic sectors of the economy, while Abioye expects stronger lending to telecommunications, manufacturing, oil and gas, real estate and construction in the coming year.