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Demand for credit from Nigerian businesses and households strengthened during the second quarter of 2026, while banks recorded fewer loan defaults across most segments of the economy, according to the latest Credit Conditions Survey released by the Central Bank of Nigeria (CBN).
The report points to improving confidence in the banking sector despite the country’s high-interest-rate environment, with lenders reporting stronger appetite for loans alongside better repayment performance by borrowers.
Businesses Lead Increase in Credit Demand
The CBN survey showed that demand for loans rose across major borrower categories during the April-to-June period.
Corporate customers, particularly large enterprises and small and medium-sized businesses (SMEs), accounted for much of the increase as firms sought additional financing to support working capital, business expansion and operational activities.
Household demand for credit also improved, driven by requests for personal loans, mortgages and consumer financing. Banks surveyed by the apex bank indicated that the upward trend in credit applications reflected stronger economic activity and increased financing needs across different sectors.
Loan Defaults Ease Across Key Segments
Alongside stronger demand, Nigerian banks reported an improvement in loan performance during the second quarter.
According to the survey, default rates declined across most lending categories, suggesting that borrowers were generally better able to meet their repayment obligations despite elevated borrowing costs.
The improvement comes after concerns over rising non-performing loans earlier in the year, indicating that credit quality may be stabilising as economic conditions gradually improve.
Banks Maintain Cautious Lending Approach
Although demand for loans increased, lenders continued to apply prudent credit standards when approving new facilities.
Banks said they remained focused on borrowers with stronger credit profiles while carefully assessing repayment capacity amid prevailing macroeconomic conditions.
The survey also showed that financial institutions expect loan demand to remain positive in the third quarter of 2026, particularly from businesses seeking funding for investment and expansion projects.
High Interest Rates Still Shape Borrowing Decisions
The latest findings come against the backdrop of the CBN’s tight monetary policy, with benchmark interest rates remaining elevated as the apex bank continues efforts to contain inflation and support exchange-rate stability.
While higher lending rates have increased borrowing costs for businesses and consumers, the survey suggests that financing needs continue to outweigh the impact of expensive credit for many borrowers.
Analysts note that companies requiring working capital and investment funding have remained active in the credit market despite the challenging interest-rate environment.
Improved Asset Quality Supports Financial Stability
The decline in default rates is expected to strengthen banks’ balance sheets by reducing pressure from impaired loans and improving overall asset quality.
Healthier loan performance could also encourage lenders to expand credit to productive sectors of the economy, supporting investment, job creation and economic growth.
Industry observers say sustained improvements in repayment performance will be important in reinforcing confidence within Nigeria’s financial system, particularly as banks continue implementing recapitalisation plans and adjusting to evolving regulatory requirements.
Outlook Remains Positive
Looking ahead, the CBN survey indicates that banks expect both loan demand and credit availability to remain broadly positive in the coming months, although lending decisions are likely to remain influenced by inflation, interest rates and broader macroeconomic conditions.
If repayment trends continue to improve and economic activity remains resilient, Nigeria’s banking sector could see stronger credit growth during the second half of 2026, providing additional support for businesses and households seeking access to finance.
