Banks Set for 20% Loan Growth as Fresh Capital Strengthens Lending Capacity – Fitch

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By Boluwatife Oshadiya | July 2, 2026

Key Points

• Nigerian banks are projected to expand lending by about 20% in 2026 as they deploy fresh capital raised through recapitalisation
• Fitch says the sector’s impaired loan ratio rose to 8% after the withdrawal of regulatory forbearance but expects it to ease to around 5% by year-end
• Improved capital buffers and stronger foreign currency liquidity are expected to support profitability and credit expansion

Main Story

Nigerian deposit money banks are expected to significantly increase lending activity in 2026, with total loan growth projected to reach about 20% as financial institutions begin deploying fresh capital raised under the industry’s recently concluded recapitalisation programme, according to global credit ratings agency Fitch Ratings.

In a new commentary, Fitch said the additional paid-in capital has strengthened banks’ balance sheets despite mounting pressure from rising impaired loans following the withdrawal of long-standing regulatory forbearance at the end of the first half of 2025.

The agency noted that the banking sector’s impaired loan ratio climbed sharply to 8% as of January 2026, compared with 4.5% in 2024, largely because several loans—particularly exposures to the oil and gas sector—were reclassified as impaired after regulatory relief measures expired.

However, Fitch believes the deterioration in asset quality will prove temporary. The agency expects the impaired loan ratio to decline to about 5%

by the end of 2026, supported by higher oil production, firmer crude oil prices and continued loan write-offs.

The report also said the fresh capital raised by banks has enabled many institutions to absorb additional loan-loss provisions and regulatory capital deductions arising from higher impaired loans and single-obligor limit breaches, while remaining above the minimum capital adequacy requirements set by the Central Bank of Nigeria (CBN).

Fitch further projected that industry profitability, which weakened in 2025 due to higher impairment charges and the absence of foreign exchange revaluation gains recorded during the naira devaluations of 2023 and 2024, will improve modestly this year.

“Capital raisings to meet the new requirements have enabled many banks to absorb additional provisions… while generally remaining compliant with their respective minimum total capital adequacy ratio requirements,”

Fitch Ratings said in the commentary.

The ratings agency added that net interest margins are expected to remain broadly stable as the CBN maintains a cautious monetary policy stance amid renewed inflationary pressures, creating conditions for stronger earnings recovery across the banking sector.

What’s Being Said

Fitch Ratings said the recapitalisation exercise has positioned Nigerian banks to support stronger credit creation despite the temporary deterioration in asset quality.

“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,” the ratings agency stated.

The agency also noted that improved foreign exchange market liquidity, supported by previous naira depreciation and stronger oil receipts, has enhanced banks’ ability to meet foreign currency obligations, particularly as several lenders approach Eurobond maturities.

What’s Next

• Nigerian banks are expected to begin deploying newly raised capital more aggressively across corporate, commercial and retail lending during the second half of 2026.
• Investors and analysts will closely monitor banks’ half-year and full-year financial results for evidence of improving asset quality and profitability.
• The banking sector’s performance will also depend on the CBN’s monetary policy direction, inflation trends and developments in global crude oil prices, which remain key drivers of Nigeria’s economic outlook.

Bottom Line:

Nigeria’s banking recapitalisation is beginning to translate into stronger lending capacity, even as asset quality remains under pressure. If Fitch’s projections materialise, 2026 could mark a turning point for the sector, with healthier balance sheets enabling banks to expand credit, improve profitability and play a larger role in supporting economic growth.