Nigeria's banks have recently undergone recapitalisation and are reporting some of their largest profits on record, with substantial cash reserves on their balance sheets. However, government debt is constraining the amount of credit available for businesses to borrow, limiting their capacity to invest and expand operations.
The situation highlights a structural challenge in Nigeria's financial system: while the banking sector itself remains robust and well-capitalised, the composition of lending is being shaped by government borrowing needs. This dynamic is reducing the pool of funds banks can direct towards private enterprise financing.