Manufacturing credit in Nigeria plummeted by 33.8 percent, dropping from N8.53 trillion in December 2024 to N5.65 trillion in August 2026, according to figures presented by the Nigerian Economic Summit Group at a banking industry event in Lagos. The decline raises serious questions about whether the banking sector's N4.65 trillion recapitalisation exercise, which concluded in March 2026, will deliver industrial growth. Manufacturing's share of total bank credit fell sharply to 8.7 percent by August 2026 from 17.4 percent in December 2023, while average credit to the sector dropped 26 percent year-on-year between January and August 2026 to N5.7 trillion.
Banks are instead directing capital towards trade and commerce, which received 49 percent more credit over the same January-to-August 2026 period, reaching N5.9 trillion. The shift reflects how financial institutions prefer less risky, shorter-term lending rather than the long-term financing manufacturing requires for machinery and expansion. The recapitalisation raised N4.65 trillion through 33 of 37 banks meeting new minimum capital requirements, with domestic investors providing 72.6 percent and foreign investors 27.4 percent. Theoretically, this capital could support between N31 trillion and N46.5 trillion in lending depending on capital ratios, but actual lending to productive sectors has moved in the opposite direction.
The challenge extends beyond manufacturing alone. Oil and gas absorbed N18.15 trillion in credit as of August 2026, while finance and insurance received N11.46 trillion, together accounting for roughly 46 percent of all bank credit. Agriculture, which employed 33.5 percent of Nigeria's workforce in 2025, received only 6.2 percent of credit. Nigeria's credit market remains shallow at 13 percent of gross domestic product in 2025 compared with 38.1 percent in lower-middle-income economies. High borrowing costs compound the problem, with lending rates between 19 percent and 32.6 percent despite the Central Bank of Nigeria cutting its monetary policy rate to 23 percent in September 2026.
Government borrowing is squeezing private-sector financing. Credit to the government rose 63 percent year-on-year to N39.4 trillion in September 2026, compared with 16 percent growth in private-sector credit to N83.9 trillion. Treasury bill yields around 16 percent offer banks safer returns than industrial lending. Lagos State Governor Babajide Sanwo-Olu called for banks to develop financing models supporting long-term industrial growth while maintaining prudent risk management, saying manufacturers needed capital to acquire machinery and compete internationally.
The Nigerian Economic Summit Group argued the issue is not capital scarcity but how existing financial institutions deploy funds. It proposed a coordinated framework combining commercial banks, pension funds, insurance companies, the Bank of Industry, the Development Bank of Nigeria and credit guarantee institutions to offer long-term funding with risk-sharing arrangements and interest rebates. The group recommended banks develop specialist industrial lending capabilities, use digital cash-flow data and movable assets beyond traditional land collateral, and target manufacturing's share of GDP at 15 percent by 2030 and 25 percent by 2035.
Banks with stronger capital bases may not increase lending to manufacturers or other productive sectors, limiting access to financing for businesses seeking long-term expansion. The Chartered Institute of Bankers of Nigeria said the real test was whether recapitalisation would translate into new industries, expanded businesses and sustainable jobs rather than simply boosting bank capital alone.