Muda Yusuf warns stronger banks are yet to translate into growth for businesses and households….
Nigeria’s banking sector may have emerged stronger from the latest recapitalisation exercise, but concerns are growing over whether the gains will translate into real economic impact.
The Centre for the Promotion of Private Enterprise has commended the Central Bank of Nigeria for successfully executing the reform, describing it as orderly, non-disruptive, and confidence-enhancing.
But speaking in a statement released on Sunday, the Chief Executive Officer of CPPE, Muda Yusuf, cautioned that the real challenge lies beyond capital adequacy.
Yusuf noted that while 32 banks have met the new minimum capital requirements as of March 27, 2026, the absence of depositor losses, forced mergers, or job cuts marks a significant improvement compared to previous consolidation exercises.
“This outcome reflects stronger regulatory capacity and improved resilience in the banking system,” he said.
Credit gap remains a major concern
Despite these gains, Yusuf stressed that the link between the financial system and the productive economy remains weak.
According to him, private sector credit in Nigeria stands at about 17 per cent of GDP, trailing behind regional and global benchmarks.
He pointed out that countries such as South Africa and Mauritius have significantly higher credit penetration, highlighting Nigeria’s structural limitations in financial intermediation.
SMEs and consumers largely excluded
Yusuf further expressed concern over limited access to credit for key economic players.
He revealed that consumer credit accounts for only about 7 per cent of total lending, while small and medium-sized enterprises receive just 1 per cent, despite their dominant role in employment and GDP contribution.
With an estimated ₦48 trillion financing gap, SMEs remain one of the most underserved segments of the economy.
“This represents a major weakness in Nigeria’s financial architecture,” he said.
Short-term lending dominates system
The CPPE boss also highlighted structural imbalances in credit allocation, noting that the bulk of lending is short-term.
About 55 per cent of total credit has a maturity of less than one year, while long-term financing critical for sectors like manufacturing and infrastructure remains limited.
He added that credit distribution is heavily skewed toward the services sector, with relatively low funding directed to agriculture and manufacturing.
Why stronger banks aren’t driving growth
Yusuf attributed the disconnect to several persistent challenges, including:
- High government borrowing crowding out private sector access
- Elevated interest rates
- Strict collateral requirements for SMEs
- Bank preference for low-risk, short-term investments
“These factors continue to constrain the flow of credit to productive sectors,” he explained.
Call for policy shift
With recapitalisation nearing completion, Yusuf urged both monetary and fiscal authorities to focus on deepening financial intermediation.
He called for deliberate policies to increase private sector credit, support SME financing, and encourage long-term lending to critical sectors of the economy.
“The priority must now shift from capital adequacy to economic impact,” he said.
A defining moment for Nigeria’s economy
While acknowledging the success of the recapitalisation programme, Yusuf maintained that its true value will only be realised if it leads to increased investment, job creation, and sustained economic growth.
“Nigeria needs not just stronger banks,” he concluded, “but banks that work for the economy.”
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