Centre for the Promotion of Private Enterprise (CPPE) has said that although Central Bank of Nigeria’s (CBN) bank recapitalisation exercise has strengthened the financial system, its impact on the real economy remains limited.
Gatekeepers News reports that in a statement, CPPE’s Chief Executive Officer, Muda Yusuf, commended the recapitalisation process, describing it as “orderly, non-disruptive and confidence-enhancing,” noting that it marked a major milestone in Nigeria’s banking sector reforms.
He revealed that about 32 banks have already met the new minimum capital requirements, with no reported cases of depositor losses, forced mergers, job cuts, or erosion of shareholder value.
However, the economist expressed concern over the weak connection between the banking sector and the real economy.
“However, while recapitalisation has significantly strengthened the capacity of banks to absorb shocks… the critical question now is whether this stronger banking system will sufficiently support the real economy,” Yusuf said.
“The evidence suggests that this linkage remains weak.”
According to CPPE, private sector credit in Nigeria is about 17 percent of GDP as of 2025, which is lower than the sub-Saharan African average of 25 percent and 34 percent for lower-middle-income countries.
The organisation also highlighted gaps in lending, noting that small and medium enterprises (SMEs) receive only about 1 percent of total bank credit despite contributing significantly to employment and economic output.
It further stated that consumer credit accounts for just 7 percent of total lending, while a large share of loans—about 55 percent—are short-term, limiting financing for key sectors such as manufacturing, agriculture, and infrastructure.
“This structure is not aligned with the financing needs of critical sectors such as manufacturing, agriculture, infrastructure and real estate,” the CPPE added.
Yusuf attributed the weak credit flow to factors such as high government borrowing, tight monetary policies, high interest rates, and strict collateral requirements for businesses.
He urged CBN and fiscal authorities to focus on reforms that will improve financial intermediation and ensure that bank strength translates into meaningful economic growth, including increasing private sector credit and supporting SME financing.
