Banks’ Loans to Grow by 20% as New Capital Boosts Lending Appetite -Note
Nigerian deposit money banks (DMBs) ‘ total loan portfolio growth is projected to increase by about 20% in 2026 as lenders deploy new paid-in capital, Fitch Ratings said in a commentary note.
The projected figure is anchored in the expectation that local lenders will deploy new paid-in capital following the recently completed recapitalisation programme.
In a commentary note, Fitch said Nigerian banks’ impaired loan ratios increased sharply, putting pressure on capitalisation, following the withdrawal of longstanding forbearance at end-1H25.
However, this pressure was offset by strong internal capital generation and capital raisings to meet new paid-in capital requirements that took effect at the end of 1Q26, Fitch Ratings says in a new report.
The report highlighted that the withdrawal of regulatory forbearance led to some problem loans, particularly oil and gas loans, being reclassified as impaired.
The banking sector’s impaired loans ratio increased to 8% at the end of January 2026 from 4.5% in 2024, but Fitch expects it to decline to about 5% at the end of 2026 on higher oil production and prices, and write-offs.
Fitch said capital raisings to meet the new requirements have enabled many banks to absorb additional provisions, particularly prudential provisions that completely disregard collateral, resulting from higher impaired loans, and capital deductions resulting from single-obligor limit breaches, while generally remaining compliant with their respective minimum total capital adequacy ratio requirements.
Industry profitability generally declined in 2025 due to higher loan impairment charges and the absence of foreign-exchange revaluation gains resulting from the devaluation of the Nigerian naira in 2023-2024.
Fitch expects profitability to improve slightly in 2026, driven by declining loan impairment charges and net interest margins remaining broadly stable, as the Central Bank of Nigeria pauses its monetary easing in response to renewed inflationary pressures.
The global ratings agency forecasts loan growth to accelerate to about 20% in 2026 from 2% as banks begin deploying the fresh capital they have raised.
It said the naira devaluation has benefited the sector’s foreign-currency liquidity by increasing foreign-exchange market turnover.
This improvement has been timely given that several banks have maturing Eurobonds. Foreign-currency liquidity is set to benefit further from higher oil prices, Fitch stated.
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