Banks’ trade lending jumps 62% as manufacturing credit falls 27%

Nigerian banks are directing a growing share of their outstanding credit towards trade and general commerce, while financing to manufacturers has contracted sharply, raising concerns about the availability of funds for domestic production, industrial expansion and job creation.

Sectoral credit data published by the Central Bank of Nigeria (CBN) show that average outstanding credit to trade and general commerce rose 62.04 per cent to N5.94 trillion in the first half of 2026, from N3.66 trillion in the corresponding period of 2025.

Manufacturing moved in the opposite direction, with average outstanding bank credit falling 26.94 per cent to N5.71 trillion from N7.81 trillion over the same period.

The divergence highlights an uneven distribution of bank financing across the economy, with credit balances in trading increasing substantially even as manufacturers face a shrinking pool of outstanding bank loans.

The figures represent average outstanding loan balances, rather than the value of fresh loans approved during the period. They do not, on their own, establish whether the decline in manufacturing credit reflects tighter lending decisions, weaker demand for loans, repayments or a combination of factors.

Nevertheless, the scale of the contraction suggests that manufacturing is losing ground in the allocation of bank credit. The sector accounted for 16.43 per cent of total outstanding bank credit in the first half of 2022, but its share had fallen to 9.58 per cent by the first half of 2026.

The shift comes at a critical time for Nigeria’s industrial sector, which requires long-term financing to acquire machinery, expand factories, purchase raw materials and increase production capacity.

By contrast, trade and general commerce can offer banks opportunities to finance shorter-term transactions, particularly where inventory turnover and repayment cycles are easier to assess. However, the data do not establish that banks are deliberately favouring traders over manufacturers.

Across the 17 sectors tracked, 12 recorded increases in average outstanding credit during the first half of 2026, while five experienced declines. Agriculture, construction, power and energy, transportation and storage also recorded increases, although overall credit growth across the economy remained modest.

Industrial oil and gas remained the largest recipient of bank credit, but its outstanding balance fell. General services, information and communication technology, and real estate also recorded declines.

The continued contraction in manufacturing credit adds to longstanding concerns over the cost of financing industrial activity. Manufacturers Association of Nigeria Director-General, Segun Ajayi-Kadir, has previously warned that prime lending rates around 30 per cent could restrict manufacturers’ access to affordable credit.

The CBN reset its Monetary Policy Rate to 23 per cent in September from 26.5 per cent, but the adjustment does not automatically translate into cheaper commercial lending. Banks’ actual lending rates also reflect funding costs, credit risks and the operating conditions facing borrowers.

For manufacturers, sustained access to reasonably priced financing is essential to raising productivity, expanding output and reducing reliance on imported finished goods. When credit becomes scarce or prohibitively expensive, businesses may delay investment, operate below capacity or pass higher production costs on to consumers.

The latest figures therefore raise a broader economic question about whether Nigeria’s banking system is financing enough productive activity to support industrial growth.

With banks having completed a major recapitalisation exercise, the next test is whether their strengthened balance sheets translate into more sustainable financing for factories and other productive businesses, rather than credit growth remaining concentrated in selected sectors.