The African Development Bank (AfDB) has raised concerns about the low level of lending by Nigerian banks to businesses, revealing that credit to the private sector accounts for only 9.4 percent of Nigeria’s Gross Domestic Product (GDP).
According to the bank’s African Economic Outlook 2026 Report, Nigeria is among the weakest-performing major African economies when it comes to providing loans and financial support to businesses. The report suggests that the country’s financial system is not playing a strong enough role in driving economic growth and supporting private enterprises.
The AfDB compared Nigeria’s performance with other African countries and emerging economies. It noted that private sector credit stands at 31.6 percent of GDP in Kenya, 28.3 percent in Egypt, and 21.4 percent in Côte d’Ivoire. These figures are significantly higher than Nigeria’s 9.4 percent. The gap becomes even more noticeable when compared with countries such as Vietnam, Malaysia, and Chile, where private sector credit exceeds 100 percent of GDP.
The report also highlighted a wider challenge across Africa. Between 2020 and 2024, average domestic credit to the private sector on the continent stood at 34.6 percent of GDP, making it the lowest among all global regions. This represents a decline compared to previous years.
According to the AfDB, many African banks focus mainly on short-term and low-risk investments instead of providing long-term financing for businesses and development projects. This approach limits economic expansion and reduces opportunities for job creation and industrial growth.
The bank explained that weak financial intermediation is one of the main reasons behind the problem. In simple terms, financial institutions are not effectively moving savings into productive investments that could help businesses grow.
Another major issue identified in the report is the low level of savings across many African countries. The continent’s average gross domestic savings rate was 16.6 percent of GDP between 2021 and 2024, well below the global average of 27.3 percent. Low savings reduce the amount of money banks can lend and make it harder for them to access stable and affordable funding.
The AfDB also pointed to regulatory and legal challenges. Weak enforcement of loan collateral, lengthy court processes, and strict banking requirements make lending riskier for financial institutions. As a result, many banks prefer safer investment options rather than extending loans to businesses.
In addition, commercial banks across Africa continue to invest heavily in government securities. While these investments are considered low-risk and profitable, they reduce the amount of money available for businesses seeking credit.
For Nigeria specifically, the AfDB described the financial system as relatively shallow. It noted that the country’s stock market capitalization averaged only 11.8 percent of GDP between 2020 and 2024, one of the lowest levels on the continent.
The report further warned that Nigeria faces difficulties in raising enough funding for infrastructure development and essential public services. Factors such as weak government revenue collection, a large informal economy, and a limited economic base continue to create challenges.
To address these issues, the AfDB recommended deeper financial sector reforms and greater use of alternative financing tools, including green bonds, public-private partnerships, blended finance, and debt-for-development swaps. The bank also called for stronger cooperation with development finance institutions to improve resource mobilization and increase long-term investment.
The findings come as concerns grow over high interest rates and increasing government borrowing, which many experts believe are limiting access to credit for businesses, especially small and medium-sized enterprises. Economist Muda Yusuf recently warned that government borrowing is drawing funds away from the private sector, as banks increasingly prefer investing in government securities rather than lending to businesses.
