Nigerian banks are reporting mixed outcomes in customer lending between the fourth quarter of 2024 and the first quarter of 2025, as the sector grapples with rising interest rates and credit risk management challenges. Operational results from leading financial institutions show that customer loans remained largely flat, with nearly half of the reviewed banks experiencing a drop in lending.
Despite a few banks recording increases, the overall picture indicates a hesitant lending environment shaped by economic pressure and rising borrowing costs. A review of ten major banks, including the five largest institutions controlling over two-thirds of the banking sector, revealed that 40 per cent reported a decline in customer loans during the first three months of the year.
Among those that saw a reduction in their loan books were some of the country’s largest lenders, including Access Holdings Plc, Ecobank Transnational Incorporated (ETI) Plc, United Bank for Africa (UBA) Plc, and StanbicIBTC Holdings Plc. This development weighed heavily on overall loan growth in the industry, resulting in only a marginal increase in aggregate customer loans.
Ecobank, the bank with the highest loan portfolio, saw its loans fall from N15.436 trillion in December 2024 to N15.311 trillion by March 2025. Access Holdings, which held N11.488 trillion in loans as of December, dropped to the third position with N10.962 trillion. Similarly, UBA’s customer loans declined slightly from N6.954 trillion to N6.827 trillion, while StanbicIBTC saw a dip from N2.348 trillion to N2.262 trillion.
Total loans across the ten banks stood at N67.118 trillion by March 2025, representing a minimal increase of just 0.75 per cent from the N66.629 trillion recorded at the end of 2024.
However, some banks bucked the trend by recording gains in their loan books. Fidelity Bank saw a modest increase from N4.387 trillion to N4.605 trillion. Zenith Bank, one of the sector’s strongest players, expanded its loan portfolio from N10.994 trillion to N11.082 trillion.
First Holdco Plc, the parent company of First Bank of Nigeria, posted a notable increase, raising customer loans from N8.768 trillion to N9.202 trillion. Guaranty Trust Holding Company (GTCO) Plc grew its loan book from N2.786 trillion to N3.220 trillion. Wema Bank and FCMB Group also recorded marginal increases, with Wema Bank moving from N1.201 trillion to N1.211 trillion and FCMB from N2.357 trillion to N2.436 trillion.
According to the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, the cautious lending trend is largely due to the prevailing high interest rate regime, which has made borrowing unattractive and financially risky for many businesses and individuals.
Dr. Yusuf noted that many borrowers are scaling back their credit exposure as a result of what he termed “prohibitive interest rates.” He said the high cost of borrowing—often ranging between 30 and 35 per cent—makes it nearly impossible for businesses to maintain profitability while servicing debts.
“Taking credit under the current condition is a very difficult decision to make,” Yusuf explained. “How would anybody want to go and take a credit facility at 30 per cent or 35 per cent unless such a person or such a business is in an extremely desperate situation? Nobody wants to touch that kind of credit because it’s suicidal.”
He further noted that much of the credit currently appearing on the books of banks comprises legacy loans that businesses secured in earlier years and are still servicing. In the current economic climate, however, taking new loans is becoming increasingly rare due to the unsustainable costs.
Yusuf also pointed out that businesses are turning to alternative financing options, such as commercial papers, capital market instruments, and equity funding. These options, while also challenging, offer more flexibility than the traditional credit provided by banks.
“People are looking at other options. They are exploring the capital market, commercial papers, and raising more equity. These are now more attractive than taking commercial credit from banks with such high interest rates,” he added.
He stressed that even businesses seeking working capital, especially in sensitive sectors like petroleum downstream, are finding it difficult to manage debt due to price volatility and unpredictable returns.
“One of the most frequent users of working capital are operators in the petroleum downstream sector. But many of them are now lamenting because of the volatility in fuel prices. Many have burnt their fingers. Taking loans under such conditions is extremely risky and could endanger any business,” Yusuf said.
Meanwhile, a senior executive in one of the commercial banks, who spoke on condition of anonymity, confirmed that banks are increasingly focused on improving the quality of their assets. According to the executive, lenders are adopting stricter credit risk controls to protect themselves against defaults in a high-interest environment.
The cautious approach among Nigerian banks signals a broader concern over credit risk and the sustainability of economic recovery in the face of inflationary pressures, interest rate hikes, and subdued business confidence. While some banks may continue to lend, the overall trend points to a sector that is holding back until conditions become more favourable.
