Improving economy drives higher corporate borrowing, lower defaults — CBN

Demand for corporate and secured loans strengthened in the second quarter of 2026 as Nigerian banks increased credit supply, approved more loan applications and recorded lower default rates across key lending segments, according to the latest Credit Conditions Survey released by the Central Bank of Nigeria (CBN).

According to the CBN, credit availability increased across all major lending categories during the quarter, led by secured lending, which recorded an index of 25.2 points, followed by corporate lending at 20.4 points and unsecured lending at 10.5 points.

Loan demand also improved significantly, with demand for corporate loans rising to 15.2 index points and secured loans increasing to 15.1 index points. However, demand for unsecured loans remained subdued, posting a negative reading of -1.2 index points.

The CBN said defaults fell in secured and unsecured household lending as well as among corporate borrowers, including small businesses, medium-sized and large private non-financial corporations, and other financial institutions.

The report noted that all major borrower categories experienced stronger credit demand during the quarter, with the exception of other financial corporations, where borrowing activity remained largely unchanged.

According to the apex bank, increased lending was driven by improving macroeconomic conditions, banks’ efforts to expand market share and stronger liquidity across the financial system.

Banks also adjusted loan pricing during the period, with interest rate spreads narrowing across most lending categories relative to the Monetary Policy Rate (MPR).

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The spread on unsecured household loans narrowed to 7.8 index points, while corporate lending spreads fell to 14.0 index points for other financial corporations, 5.0 index points for medium-sized private non-financial corporations and 4.7 index points for large private non-financial corporations.

However, lending to small businesses remained relatively more expensive, with the interest rate spread widening to -3.8 index points. Similarly, the spread on secured household lending widened by -4.5 index points relative to the MPR.

Separate CBN data also showed that credit to Nigeria’s private sector continued its upward trajectory, rising from N81.04 trillion in May to N83.26 trillion in June 2026, representing a 2.74 per cent month-on-month increase.

In contrast, lending to the government declined marginally to N40.03 trillion in June from N40.38 trillion recorded in May.

Despite the expansion in business lending, consumer credit weakened during the review period.

According to the CBN’s 2025 Annual Report and Statement of Accounts, outstanding consumer credit declined by 19.89 per cent to N3.78 trillion in 2025 from N4.72 trillion in the preceding year, marking the first annual decline since December 2019.

The apex bank attributed the drop largely to the prevailing high-interest-rate environment, which has discouraged household borrowing.

Meanwhile, private sector stakeholders, including the Centre for the Promotion of Private Enterprise (CPPE), have continued to caution the apex bank against further monetary tightening, arguing that higher borrowing costs could slow investment, weaken economic recovery and place additional pressure on businesses and consumers.