Nigerian Banks Cut Lending to Manufacturers by 26.8% to N5.19 Trillion

Nigerian banks sharply reduced their exposure to the manufacturing sector in the second quarter of 2026, cutting credit to industry by 26.8 per cent as outstanding loans fell to N5.19 trillion, according to latest Central Bank of Nigeria data.

The pullback marks one of the more striking sectoral shifts in the banking system's credit book, and it comes as manufacturers continue to cite high borrowing costs, energy expenses and weak demand as constraints on expansion and working capital.

Where the credit went instead

Banks have generally preferred shorter-tenor government securities and money market instruments to longer-dated industrial lending through much of the past two years, given the superior risk-adjusted returns available on sovereign paper. With FGN bonds and treasury bills offering substantial yields and effectively zero credit risk for regulatory purposes, the opportunity cost of patient manufacturing loans has been high.

Regulatory loan-to-deposit ratios and directional lending requirements have partially counteracted that bias, but the Q2 data suggest commercial calculations still dominate when manufacturers present projects at current rates.

What manufacturers are saying

Industry groups have repeatedly flagged the cost and availability of credit as binding constraints, on top of diesel and gas costs, port congestion and currency exposure on imported inputs. For small and mid-sized manufacturers without hard collateral or established banking relationships, the squeeze is most acute.

A 26.8 per cent contraction in sector credit within a single quarter is large enough to affect production plans, inventory builds and capital expenditure timelines across the sector's more credit-dependent segments.

The recapitalisation angle

As banks complete their recapitalisation programmes, loan books are being repositioned for the new capital base. Whether manufacturing regains share in the months ahead will depend on how banks price industrial risk once recapitalisation settles, and on whether government measures to reduce energy costs and improve demand actually move the needle on factory-level economics.