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By Uche Usim
Loans extended by commercial and merchant banks in Nigeria fell to N52.656 trillion in June 2025, the lowest level recorded in 14 months.
It highlighted the growing caution within the banking sector amid tightening regulatory demands.
The figure, contained in the Central Bank of Nigeria’s latest quarterly statistical bulletin, represents a sharp pullback from May’s N55.395 trillion. The N2.739 trillion decline translates to a 4.95 percent month-on-month contraction, reflecting restrained credit creation as banks prioritise balance-sheet strength.
The last time total loans dropped below this level was in April 2024, when credit stood at N51.467 trillion. On a year-on-year basis, lending was broadly flat, edging down by N9 billion, or less than one percent, from N52.665 trillion recorded in June 2024.
Industry watchers say the subdued lending trend mirrors banks’ cautious posture as they navigate recapitalisation requirements set by the apex bank. The CBN has fixed March 30, 2026, as the deadline for deposit money banks to comply with revised minimum capital thresholds, a move that has forced lenders to recalibrate risk appetite and conserve capital.
Loan movements in the first quarter of 2025 illustrate the sector’s uneven credit trajectory. In January, total loans rose to N54.153 trillion, up from N53.521 trillion in the corresponding month of 2024. February, however, saw a notable drop to N53.059 trillion, compared with N57.173 trillion a year earlier. Lending rebounded in March to N54.136 trillion, well above the N49.614 trillion posted in March 2024, before weakening again in subsequent months.
These fluctuations highlight the delicate balancing act banks face between supporting economic activity through credit expansion and meeting stricter regulatory and capital adequacy requirements.
Commercial and merchant banks jointly account for the bulk of lending activity in the economy. Commercial banks typically extend credit to individuals and businesses for general financial needs, including personal loans, working capital, mortgages and consumer finance. Merchant banks, by contrast, focus on large corporates, offering trade finance, project funding and advisory-linked financing tied to mergers, acquisitions and restructuring.
Beyond recapitalisation pressures, asset quality concerns are also weighing on lending decisions. Nairametrics had earlier reported a fresh rise in bad loans across the banking industry in 2025 following the CBN’s withdrawal of regulatory forbearance measures that allowed pandemic-affected facilities to be restructured without being classified as non-performing.
According to the CBN’s latest macroeconomic outlook, the sector’s non-performing loans ratio climbed to an estimated seven percent, breaching the prudential threshold of five percent. The deterioration in asset quality has heightened risk sensitivity among lenders, reinforcing a more conservative credit stance.
As banks juggle capital raising, rising credit risk and regulatory compliance, analysts expect lending growth to remain subdued in the near term, with meaningful expansion likely hinging on successful recapitalisation and improvements in loan performance.
