Nigeria Among Africa’s Weakest in Business Lending as Banks Extend Only 9.4% of GDP to Private Sector — AfDB

The African Development Bank has raised concerns over Nigeria’s low level of private sector financing, revealing that banks in the country lend the equivalent of just 9.4 per cent of Gross Domestic Product (GDP) to businesses, one of the weakest performances among Africa’s major economies.

The disclosure was contained in the AfDB’s African Economic Outlook 2026 report, which highlighted the limited role of Nigeria’s financial system in supporting business expansion, investment, and economic growth.

According to the report, Nigeria trails several African peers in private sector credit provision, with lending levels significantly below those recorded in countries such as Kenya (31.6 per cent), Egypt (28.3 per cent), and Côte d’Ivoire (21.4 per cent).

The bank also noted that African economies generally lag far behind emerging lower-middle-income countries, citing figures from Vietnam (121.6 per cent), Malaysia (121.5 per cent), and Chile (111.8 per cent).

The report showed that Africa’s average domestic credit to the private sector stood at 34.6 per cent of GDP between 2020 and 2024, the lowest among global regions and a decline from previous years.

According to the AfDB, poor financial intermediation remains a major challenge, with banks across the continent largely directing funds toward short-term and low-risk assets rather than productive long-term investments capable of driving development.

“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 report stated.

The development finance institution attributed the weak lending environment to low domestic savings, inadequate financial mobilisation, and regulatory inefficiencies.

It noted that Africa’s gross domestic savings averaged 16.6 per cent of GDP between 2021 and 2024, substantially below the global average of 27.3 per cent. Low savings, the report explained, limit banks’ capacity to expand their balance sheets and provide affordable, long-term credit to businesses.

The AfDB also pointed to weak regulatory frameworks, slow judicial processes, and poor collateral enforcement mechanisms as factors discouraging lending to private enterprises.

According to the report, stringent prudential requirements and uncertainties surrounding loan recovery increase the perceived risks associated with business lending, prompting banks to prioritise safer investment options.

“Countries with strong regulatory frameworks tend to have higher private sector credit as a share of GDP,” the bank noted.

The report further observed that commercial banks across Africa, including Nigeria, continue to channel substantial resources into government securities, reducing funds available for businesses seeking financing.

Assessing Nigeria’s financial sector, the AfDB described the system as relatively shallow, noting that stock market capitalisation averaged only 11.8 per cent of GDP between 2020 and 2024—among the lowest levels on the continent.

The bank warned that Nigeria faces significant hurdles in mobilising the large-scale financing required to bridge its infrastructure deficit and sustain critical social investments.

It attributed the challenge to weak domestic revenue generation, a large informal sector, and the country’s narrow economic base.

To address the gaps, the AfDB called for comprehensive financial market reforms and greater deployment of innovative financing tools, including green bonds, public-private partnerships (PPPs), blended finance arrangements, and debt-for-development swaps.

The institution also urged stronger collaboration with development finance institutions to boost domestic resource mobilisation and improve the efficiency of capital deployment.

The report comes amid growing concerns that high interest rates and increased government borrowing are limiting access to credit for businesses, particularly small and medium-sized enterprises (SMEs).

Earlier, renowned economist and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, warned that rising Federal Government borrowing from the domestic financial system is crowding out private sector investment, as banks increasingly favour government securities over business lending.