Nigeria’s economy may be entering a new phase of credit expansion as banks increase lending, businesses step up borrowing and loan defaults decline, signalling that years of monetary tightening are beginning to give way to improving financial conditions.
The Central Bank of Nigeria’s (CBN) Q2 2026 Credit Conditions Survey showed that lenders increased the supply of secured credit by 24.2 index points, corporate credit by 20.4 points and unsecured credit by 10.5 points during the second quarter.
Demand also strengthened for secured and corporate loans at 15.1 and 15.2 index points, respectively, although unsecured borrowing remained subdued at -1.2 points.
The combination of stronger credit supply, rising corporate demand and improving loan performance could mean Nigeria is approaching the early stages of a new credit cycle.
The findings come after nearly three years of aggressive monetary tightening by the CBN aimed at taming inflation and stabilising the naira following the 2023 foreign exchange reforms.
According to the survey, demand for corporate loans was driven primarily by balance-sheet restructuring (24.0 index points), capital investment (17.0 points) and inventory financing (12.9 points). Loan demand also increased among small businesses (26.5 points), medium private non-financial corporations (25.5 points) and large private non-financial corporations (8.9 points), while demand from other financial corporations remained unchanged.
Banks attributed the increase in credit supply to changes in economic conditions, liquidity positions and competitive market objectives, indicating lenders became more willing to extend credit during the quarter.
The survey also showed an improvement in loan performance, with lenders reporting lower default rates across secured, unsecured and corporate lending categories.
Default indices stood at 36.2 for secured lending, 9.7 for unsecured credit, 14.9 for small businesses, 13.5 for medium-sized private non-financial corporations, 10.7 for large private non-financial corporations and 5.9 for other financial corporations.
Credit pricing remained mixed across borrower categories. The spread between unsecured lending rates and the Monetary Policy Rate narrowed to 7.8 index points, while the spread on secured household lending widened to -4.5 points. For corporate borrowers, spreads narrowed to 14.0 points for other financial corporations, 5.0 points for medium-sized companies and 4.7 points for large companies, but widened to -3.8 points for small businesses.
The latest survey contrasts with previous periods of tighter credit conditions. Banks tightened lending during Nigeria’s 2016 recession as foreign exchange shortages and rising non-performing loans increased risks, while credit growth during the COVID-19 pandemic was supported largely by CBN intervention programmes.
The survey does not establish a sustained recovery in private-sector credit, but it indicates that lending conditions improved during the second quarter as banks expanded credit and businesses maintained demand for financing despite a restrictive monetary policy environment.
