Nigerian Banks Post Continental Lowest Lending Ratios

Nigeria's biggest banking groups posted the five lowest loan-to-deposit ratios in a continental ranking of 22 leading African lenders, as the industry's N4.65 trillion recapitalisation exercise and fresh bad-loan recognition kept credit growth far below deposit growth through 2025, a new industry survey shows.

The Africa Report's 2026 ranking of 300 Finance Champions placed the five Nigerian groups assessed — First HoldCo, Guaranty Trust Holding Company, Zenith Bank, United Bank for Africa and Access Holdings — at the bottom of the lending table, after the lenders spent much of the year raising capital to meet the Central Bank of Nigeria's minimum requirements rather than expanding credit to businesses and households. The finding lands as the same banks enter 2026 with record deposits, stronger capital buffers and mounting political pressure to turn the enlarged balance sheets into productive lending.

The survey found Nigerian banks were constrained by three forces: mandatory recapitalisation, the reversal of foreign-exchange gains after the naira's appreciation against the dollar, and the end of regulatory forbearance on loans, which forced lenders to recognise exposures that had gone unpaid.

Those pressures were visible in profitability. First HoldCo's return on equity fell from 24.2 percent in 2024 to 4.2 percent in 2025, the survey data showed, while United Bank for Africa's declined from 22.4 percent to 10.6 percent. Loan-to-deposit ratios slid in parallel: Access Holdings' ratio dropped to 38.6 percent from 50.7 percent, UBA moderated from 32.3 percent to 29.4 percent, Zenith eased from 45.5 percent to 42.8 percent, First HoldCo fell to 48.2 percent from 51.2 percent, and Guaranty Trust Holding recorded the weakest of all at 25 percent, down from 27.8 percent.

The recapitalisation programme that absorbed both management attention and investor money was launched in March 2024, when the CBN directed banks with international authorisations to lift minimum capital to N500 billion. By its conclusion in March 2026, 33 of 37 banks had met the new thresholds after raising a combined N4.65 trillion, with Nigerian investors supplying 72.6 percent of the fresh capital and foreign investors the remaining 27.4 percent.

Asset quality added further strain. Sector-wide non-performing loans climbed from 4.2 percent in January 2025 to 7.51 percent in December as forbearance ended. First HoldCo recorded the sharpest deterioration in the ranking, with its non-performing loan ratio rising from 10.2 percent to 18 percent, and its capital adequacy ratio stood at 10.95 percent, below the CBN's 15 percent requirement. Zenith Bank took the opposite tack, writing off about N1.24 trillion ($855 million) of doubtful exposures in 2025 — up from N96.5 billion the year before — to bring its non-performing ratio down to 3.8 percent.

Why deposits are not becoming loans

The gulf between deposit growth and lending is the story's central tension. Audited 2025 statements showed the same five tier-one groups lifting combined customer deposits to N114 trillion from N93 trillion in 2024, while loan books barely moved — Guaranty Trust's loans edged up from N2.78 trillion to N3.12 trillion and UBA's from N6.95 trillion to N7.02 trillion. Surplus liquidity was instead parked at the central bank or channelled into government securities, where risk-free yields often exceeded what banks judged safe to charge private borrowers.

Borrowing costs made the trade-off harsher. Even after the CBN cut its policy rate to 23 percent, commercial lending rates remained between 19 percent and 32.6 percent, pricing out most manufacturers and small firms. Private-sector credit equalled only about 17 percent of Nigeria's economic output in 2025, against an average near 25 percent for sub-Saharan Africa, according to the Nigerian Economic Summit Group.

The contrast with other African markets is instructive. Moroccan lenders, the ranking noted, maintained heavier exposure to productive businesses, while Kenyan and Egyptian groups — spared equivalent recapitalisation shocks — kept thinner capital buffers but grew credit faster than their Nigerian peers.

The 2026 test: from capital to credit

Fitch Ratings expects the dynamic to flip this year. The agency projects nominal loan growth for Nigerian banks above 20 percent in 2026 as recapitalised balance sheets return to active credit expansion, with the enlarged capital base also supporting lending to infrastructure, energy and agricultural value chains.

Central Bank officials have pressed the same message. Deputy Governor Muhammad Abdullahi told bank executives in September that the exercise's success should be judged by productive lending and service quality, not by capital raised. Nigeria's ambition to build a $1 trillion economy by 2030, he said, depends on lenders allocating capital at a far larger scale.

Analysts caution that recovery will be uneven. Banks still digesting forbearance-era exposures — above all First HoldCo — will prioritise asset repair, while groups with cleaner books, such as Zenith, have more room to lend. Equity investors have yet to be compensated: the sector's depressed return on equity in 2025 is a direct cost of the clean-up.

For Nigerian businesses, the practical signal is that financing conditions should loosen through 2026, but selectively. The banks with strongest capital ratios are likeliest to lead the credit recovery, and sectors outside oil, finance and trade — manufacturing in particular, which received only 8.7 percent of bank credit — stand to gain most if the projected lending rebound materialises.