Real Estate Among Hardest Hit as Banks Cut Lending by ₦5.4 Trillion

Banks Slash ₦5.4 Trillion in Loans to Real Estate, Manufacturing and Other Sectors

Nigerian Deposit Money Banks (DMBs) reduced lending to eight key sectors of the economy by ₦5.45 trillion, or 14.8% year-on-year, in 2025, reflecting tighter credit conditions following the Central Bank of Nigeria's (CBN) withdrawal of regulatory forbearance. The contraction affected several productive sectors, including real estate, construction, manufacturing, oil and gas, education, information and communication technology (ICT), and general services, according to the latest sectoral credit data from the CBN.

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Credit to the construction sector also dropped by 3%, decreasing from ₦2.36 trillion to ₦2.29 trillion over the same period.

For the housing sector, reduced access to bank financing could slow the pace of property development, particularly for projects that rely heavily on commercial lending. Developers may face higher financing costs and tighter borrowing conditions as banks become more selective in extending credit.

CBN Policy Drives Loan Portfolio Clean-Up

According to industry analysts, the contraction followed the CBN's decision to withdraw regulatory forbearance, a temporary measure that had allowed banks to restructure certain non-performing loans without immediately recognising them as impaired assets. The policy change required banks to clean up their loan books and reduce high-risk exposures, limiting their capacity to issue new credit.

Tunde Abioye, Head of Equity Research at Quest Merchant Bank, said the removal of regulatory forbearance resulted in significant loan write-offs, leading to a contraction in banks' overall loan portfolios. He added that banks are expected to strengthen credit approval processes and adopt more stringent risk management frameworks going forward.

Manufacturing Records Largest Credit Decline

Manufacturing recorded one of the sharpest reductions in bank lending, with credit falling 22.5% to ₦6.61 trillion, while general services experienced a 25% decline. Lending also fell across oil and gas, ICT and education, reflecting a broader tightening of credit conditions across productive sectors of the economy.

The Manufacturers Association of Nigeria (MAN) described the decline in manufacturing credit as a significant concern, arguing that high lending rates, stringent banking requirements and limited access to affordable financing continue to constrain industrial growth. The association warned that reduced credit availability could weaken production capacity, delay investment and increase reliance on imported goods.

Some Sectors Attracted More Bank Credit

Despite the overall decline in lending to several industries, banks increased credit to other sectors during the year. Agriculture recorded a 26.4% increase in lending, while finance, insurance and capital markets also attracted higher levels of bank credit. Lending to government, transportation and power projects similarly recorded year-on-year growth.

Analysts attributed the stronger performance in financial services to the prevailing high-interest-rate environment, which has supported profitability within the sector and influenced banks' lending preferences.

Implications for Nigeria's Housing Market

For Nigeria's housing sector, the reduction in bank lending to real estate and construction highlights ongoing financing challenges facing developers and investors. Commercial bank financing remains a major source of capital for residential and commercial property projects, and tighter credit conditions could affect project delivery timelines, increase development costs and constrain new housing supply.

The trend also reinforces the need for alternative housing finance mechanisms, including development finance institutions, mortgage market reforms and public-private partnerships, to bridge funding gaps and support long-term growth in the real estate sector.

Outlook

Industry experts expect lending conditions to improve as banks complete their portfolio clean-up and continue ongoing recapitalisation efforts. According to Agusto & Co., stronger bank capital positions could support increased lending to productive sectors, including real estate and construction, during 2026.

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