Deposit Money Banks (DMBs) slashed lending to oil and gas, information and communication technology (ICT) and six other key sectors of the economy by N5.45 trillion or 14.8 per cent, year-on-year (YoY), in 2025, reflecting the impact of the Central Bank of Nigeria’s (CBN) withdrawal of regulatory forbearance and banks’ loan portfolio clean-up.
Regulatory forbearance is a central bank policy that temporarily allows financial institutions to maintain operations and restructure bad loans even if they fall below strict capital or asset-quality requirements. It is designed to prevent bank failures and widespread credit crunches during economic crises.
As at first quarter of 2025 the total amount of money tied up in the CBN’s regulatory forbearance loans for seven major banks was $4.01 billion (over ¦ 6 trillion). This figure represents high-risk credit exposures and breaches of the Single Obligor Limit (SOL) that the apex bank had temporarily permitted. The withdrawal in 2025 compelled the banks to pay the monies to CBN, leaving them with reduced capacity to grant loans.
In addition to the oil and gas and ICT sector, other affected sectors are Construction, Education, Manufacturing, Real Estate and General Services.
Latest CBN data on Deposit Money Banks’ Sectoral Distribution of Credit showed that credit to the eight sectors declined to N31.31 trillion in 2025 from N36.77 trillion in 2024.
According to the CBN data, General Services recorded the steepest decline, with credit falling by 25.02 per cent to N4.35 trillion from N5.80 trillion, representing a reduction of N1.45 trillion. Manufacturing followed with a 22.52 per cent decline as credit dropped to N6.61 trillion from N8.53 trillion, translating to a contraction of N1.92 trillion.
Real Estate also recorded a 17.2 per cent decline, with bank credit dropping to N792.71 billion from N957.38 billion. Credit to Oil and Gas (Services) fell by 12.35 per cent to N4.85 trillion from N5.53 trillion, while Oil and Gas (Industry) declined by 8.77 per cent to N10.59 trillion from N11.61 trillion.
Other sectors that witnessed lower credit allocation include Information and Communication, where lending fell by 7.51 per cent to N1.76 trillion from N1.90 trillion; Education, which recorded a 5.73 per cent decline to N84.13 billion from N89.25 billion; and Construction, where credit dropped by three per cent to N2.29 trillion from N2.36 trillion.
Explaining the development, Head of Equity Research at Quest Merchant Bank, Tunde Abioye, attributed the contraction mainly to the CBN’s decision to end regulatory forbearance on troubled loans.
He said: “The major reason for the decline in loans to certain sectors was the removal of regulatory forbearance on challenged loans by CBN. This lifting of forbearance resulted in sizable write-offs of loans by banks, which ultimately resulted in a contraction in banks’ and the industry’s loan book. The most affected sectors were the oil and gas and manufacturing sectors.”
Abioye added: “A likely implication is that banks will tighten their risk management frameworks and credit approval processes. There will be increased scrutiny of prospective loans.”