Banking system liquidity in Nigeria has surged sharply following the conclusion of the sector-wide recapitalisation exercise. However, growth in lending to the private sector has lagged behind the pace of liquidity expansion, pointing to a widening gap between financial system strength and credit transmission to the real economy.
?Data exclusively obtained from the Financial Markets Dealers Association (FMDA) showed that banking system liquidity rose to N4.15 trillion as of April 2026. This marks a 1,253.06 percent increase compared to the N306.54 billion recorded in April 2023, the year the Central Bank of Nigeria (CBN) first announced the programme.
?Recapitalisation reshapes industry balance sheets
?The recapitalisation drive, which concluded on 31 March 2026, has fundamentally reshaped industry balance sheets. Banks raised over N4.65 trillion over a 24-month period to meet new capital requirements. Despite this liquidity surge, credit to the private sector has expanded at a more moderate pace.
?Lending rose by 0.9 percent month-on-month to N94.61 trillion in February 2026, compared to N93.74 trillion in January. On a year-on-year basis, credit grew by 24.06 percent from N76.26 trillion in February 2025. This divergence highlights a growing disconnect between improved banking liquidity and the pace of credit flow to businesses.
?Ayodele Akinwunmi, United Capital chief economist, said the recently concluded recapitalisation, deposit mobilisation drives, and growing confidence in the banking system were key drivers of the increased liquidity. The jump to N4.15 trillion signals a significant structural shift, representing a 1,325 percent increase compared to 2025.
?Ayokunle Olubunmi, Agusto and Co head of financial institutions ratings, noted that a challenging macroeconomic environment is still discouraging lending, although banks are gradually increasing disbursements cautiously. He added that proceeds from the capital raise exercise significantly boosted industry liquidity.
?’The recapitalisation programme has strengthened the capital base of Nigerian banks, reinforcing the resilience of the financial system and ensuring it is well-positioned to support economic growth and withstand domestic and external shocks,’ Olayemi Cardoso, Central Bank of Nigeria governor, said.
?The CBN confirmed that 33 banks met the revised minimum capital requirements. The programme has strengthened capital adequacy ratios (CAR), with the sector maintaining levels above international Basel benchmarks. Minimum CAR thresholds remain at 10 percent for regional and national banks, and 15 percent for those with international authorisation.
?Muda Yusuf, Centre for the Promotion of Private Enterprise chief executive officer, said that while recapitalisation has strengthened the capacity of banks to absorb shocks, the key question is whether this is translating into support for the real economy. Evidence suggests this linkage remains weak.
?Nigeria’s private sector credit as a share of GDP stood at 17 percent in 2025, compared with a sub-Saharan African average of 25 percent. Peer economies such as South Africa (57.5 percent) and Mauritius (69.8 percent) show stronger financial intermediation.
‘This gap underscores a persistent structural disconnect between the financial system and productive sectors of the economy,’ Yusuf said.
?Consumer credit in Nigeria remains low at about 7 percent of total credit, constraining domestic demand and limiting growth. More critically, credit to small and medium enterprises (SMEs) accounts for only 1 percent of total credit, despite SMEs contributing 50 percent of GDP and over 80 percent of employment.
?Sectoral allocation of credit also remains skewed, with services accounting for 55 percent of total credit, compared to 14 percent for manufacturing and 5 percent for agriculture. Yusuf added that 55 percent of bank lending remains short-term, with a maturity of less than one year, which is misaligned with the needs of the manufacturing and infrastructure sectors.