Nigerian banks only lend the private sector 9.4% of the nation’s GDP, indicating the financial system’s limited ability to foster economic growth and corporate expansion, according to the African Development Bank.
In its African Economic Outlook 2026 report, the bank revealed that Nigeria was among the main African economies that performed the worst when it came to private sector loan provision.
“Major African economies like Kenya (31.6%), Egypt (28.3%), Côte d’Ivoire (21.4%), and Nigeria (9.4%) remain well below comparable emerging lower-middle-income market economies like Vietnam (121.6%), Malaysia (121.5%), and Chile (111.8%),” the report states.
According to the AfDB, between 2020 and 2024, Africa’s domestic lending to the private sector averaged 34.6% of GDP, which was a decrease from the previous ten years and the lowest level among worldwide regions.
It pointed out that the majority of bank financing on the continent continued to be focused on low-risk, short-term assets rather than long-term investments that could produce better development results.
“Low intermediation implies that Africa’s financial institutions are unable to optimally support the development of the private sector and contribute meaningfully to economic growth and development,” the research said.
The AfDB blamed low domestic savings mobilization and inadequate financial intermediation for the bad credit environment.
Many African nations have poor deposit-to-GDP ratios, with the continental median being less than 32%, according to the report. Between 2021 and 2024, Africa’s gross domestic savings averaged 16.6% of GDP, far less than the worldwide average of 27.3%.
The research claims that inadequate savings mobilization inhibits banks’ capacity to provide credit, restricts the growth of their balance sheets, and limits their access to secure, affordable finance.
The bank also attributed the restricted supply of financing to businesses on regulatory flaws. It claimed that inadequately crafted or laxly implemented laws raise the costs and uncertainty of compliance, which deters lending to the private sector.
According to the paper, financial institutions are encouraged to concentrate on low-risk borrowers due to inadequate collateral enforcement, sluggish legal proceedings, and strict prudential regulations that raise perceived credit risks.
In accordance to the AfDB, “countries with strong regulatory frameworks tend to have higher private sector credit as a share of GDP.”
The lender also noted that key investors of government securities continued to be commercial banks and other financial institutions throughout Africa, a tendency that limits the amount of money available for business loans.
Based on the AfDB’s evaluation of Nigeria, the country’s financial system is shallow, and between 2020 and 2024, stock market capitalization averaged just 11.8% of GDP—among the lowest levels in Africa.
According to the research, Nigeria had a difficult time raising huge sums of money to maintain vital social spending and close its infrastructure deficit. It blamed the problem on a small economic base, a sizable informal economy, and poor domestic revenue mobilization.
In order to increase access to long-term funding, the AfDB advocated for more extensive financial market reforms and increased use of financing tools such green bonds, public-private partnerships, blended finance, and debt-for-development swaps.
Additionally, it called for increased cooperation with development finance organizations in order to enhance domestic resource mobilization and more efficiently allocate resources.
The report is released amid worries that, despite initiatives to promote private sector-led growth, high interest rates and increased government borrowing have limited credit to firms, especially small and medium-sized businesses.
Dr. Muda Yusuf, a prominent economist and CEO of the Center for the Promotion of Private Enterprise, had earlier cautioned that as banks prioritize low-risk, high-yield government securities over lending to businesses, growing Federal Government borrowing from the domestic financial system is gradually displacing the private sector.
