• CBN to examine lending slowdown at MPC meeting
• Experts urge softer regulatory rules
By Chinwendu Obienyi
Amid rising economic uncertainty, persistently high interest rates and stricter regulatory conditions, Nigeria’s biggest banks scaled back lending activities in the first quarter of 2026.
This reflected a more cautious approach to credit expansion across the banking industry.
An analysis of the Q1 2026 financial statements of five leading banks, Access Bank, First Holdco, Zenith Bank, Guaranty Trust Holding Company (GTCO) and United Bank for Africa (UBA), showed that total loans and advances declined by about 24.94 per cent year-on-year (y/y).
The combined loans granted by the banks fell to N458.98 billion in Q1 2026 from N611.52 billion in the corresponding period of 2025, highlighting what financial experts described as a “defensive lending strategy” by lenders seeking to preserve asset quality amid mounting economic uncertainties.
According to Daily Sun’s analysis, the sharpest decline came from Access Bank, whose loans and advances dropped significantly to N427.82 billion from N582.35 billion in Q1 2025, representing a decline of 26.5 per cent.
Other banks, however, recorded modest increases in lending. First loans rose to N9.44 billion from N8.97 billion, Zenith Bank increased lending to N11.38 billion from N10.05 billion, GTCO’s loans edged up to N3.17 billion from N3.13 billion, while UBA recorded N7.17 billion compared to N7.02 billion in the same period last year.
Financial experts said the overall decline reflects the banking sector’s increasing caution in the face of persistent inflationary pressures, high borrowing costs and concerns over credit risk.
Speaking on the development, they noted that many banks are becoming more selective in extending credit, particularly to sectors vulnerable to exchange rate volatility and weak consumer demand.
Nigeria’s high interest-rate environment has continued to weigh heavily on credit creation. The aggressive monetary tightening stance aimed at curbing inflation has significantly raised the cost of borrowing for businesses and households.
As a result, many corporations are scaling back expansion plans, while small and medium-sized enterprises (SMEs), which are traditionally more vulnerable to economic shocks, are finding it increasingly difficult to access affordable credit.
This prolonged weakness in bank lending could have broader implications for economic growth, especially for sectors dependent on credit financing such as manufacturing, trade, agriculture and construction.
The slowdown in lending is expected to come under discussion at the next Monetary Policy Committee (MPC) meeting of the central bank as policymakers continue to balance inflation control with the need to support economic growth.
According to experts, reduced credit expansion could slow investment, limit job creation and weaken private-sector productivity at a time when the economy requires stronger growth momentum.
Co-founder, Comercio Partners, Nnamdi Nwizu, said that the current environment is forcing banks to prioritise balance-sheet preservation over aggressive loan growth. “With interest rates still elevated and businesses facing rising operating costs, lenders are naturally tightening their risk appetite.”
Despite the lending slowdown, analysts said the cautious approach may help banks avoid a deterioration in asset quality and rising non-performing loans (NPLs), particularly given lingering uncertainties in the foreign exchange market and fragile consumer purchasing power.
Head, Research at FSL Securities, Victor Chiazor, called on regulators to strike a balance between maintaining financial system stability and encouraging lending to productive sectors of the economy.
He urged authorities to reduce regulatory pressures on banks, particularly around capital and liquidity requirements, to allow lenders greater flexibility in supporting businesses.
“There is a need for targeted policy support that encourages banks to lend without compromising financial stability. Credit guarantee schemes, lower regulatory burdens on priority-sector lending and improved macroeconomic stability would help restore confidence in the lending environment”, Chiazor explained.
While the moderation in lending reflects banks’ efforts to manage risk more prudently, Chiazor said that “a sustained contraction in credit growth could weaken the pace of economic recovery if not addressed through supportive fiscal and monetary policies”.
For now, Nigeria’s largest banks appear focused on protecting their balance sheets as they navigate a challenging operating environment marked by inflationary pressures, exchange-rate uncertainties and cautious investor sentiment.
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