Nigerian banks’ lending growth seen rising above 20% - Fitch

Nigerian banks are expected to significantly increase lending in 2026 as stronger capital positions following the industry-wide recapitalisation exercise provide room for fresh credit expansion, according to Fitch Ratings.

The global ratings agency said nominal loan growth in the banking sector is projected to accelerate to more than 20 percent in 2026 after slowing sharply to about 5 percent in 2025 due to tight monetary conditions, high interest rates and the withdrawal of regulatory forbearance measures.

In a report released on Friday, Fitch said the fresh capital raised by banks to meet the Central Bank of Nigeria’s new paid-in capital requirements has strengthened balance sheets and positioned lenders for business growth.

“All Fitch-rated licensed Nigerian banks have met the new paid-in capital requirements effective from the end of first quarter (1Q26), as have the majority of non-rated banks,” Fitch said.

The agency noted that the new capital injections have helped banks absorb additional provisions and capital deductions arising from the expiration of longstanding regulatory forbearance linked to problem loans and single-obligor limit breaches.

According to Fitch, several Nigerian banks are expected to maintain capital adequacy ratios above 20 percent at the end of the first quarter of 2026, well above the regulatory minimums of 15 percent for internationally authorised banks and 10 percent for other licensed banks.

The stronger buffers, combined with robust profitability driven by high interest rates, are expected to support aggressive balance sheet expansion.

Fitch said higher single-obligor limits resulting from stronger capital positions would also enable banks to finance larger transactions and expand lending to corporates and strategic sectors of the economy.

The report comes after the CBN announced in March 2024 a major increase in minimum paid-in capital requirements for commercial, merchant and non-interest banks, forcing lenders to raise fresh equity, merge or downgrade their licence categories.

While there had been expectations of widespread mergers and acquisitions across the sector, Fitch said M&A activity remained limited as most banks opted to raise fresh core capital instead.

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Despite the improved outlook, Fitch warned that several macroeconomic conditions could continue to constrain credit growth.

The agency said high inflation, which stood at 15.4 percent in March 2026, tight monetary policy conditions, elevated cash reserve requirements and attractive yields on government securities may continue to discourage both credit demand and supply.

It also noted that political uncertainty ahead of the January 2027 presidential election could weaken borrowing appetite among businesses and consumers.

According to Fitch, the CBN’s 45 percent cash reserve ratio on naira deposits continues to restrict the amount of liquidity available for lending, while high fixed-income yields are encouraging banks to allocate more funds to government securities rather than private sector loans.

The agency added that developments in the global oil market could also shape lending trends in the coming months.

Fitch said higher crude prices resulting from the ongoing Iran conflict may encourage banks to extend more credit to oil and gas companies, although rising oil prices could also worsen inflationary pressures and weaken broader private sector credit demand.

The ratings agency expects some of Nigeria’s well-capitalised first- and second-tier banks to deploy part of their fresh capital toward expansion across African markets to capture regional trade and financial flows.

According to the report, some banking groups with large foreign subsidiaries are likely to strengthen their existing regional operations, while more domestically focused lenders may gradually expand into new African markets.

Fitch, however, expects capital adequacy ratios to moderate over time as banks grow their risk-weighted assets through increased lending activity.

Still, the agency said strong profitability and rising business volumes should keep several Nigerian banks comfortably above minimum capital requirements through the end of 2026.

Hope Moses-Ashike

Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.