CBN: Loan Demand Rises as Banks Record Lower Defaults in Q2 2026
Loan Demand Grows as Nigerian Banks Record Declining Default Rates
Demand for credit increased across Nigeria's banking sector in the second quarter of 2026, while loan defaults declined, according to the Central Bank of Nigeria's (CBN) latest Credit Conditions Survey. The findings point to improving credit quality and stronger borrower confidence despite the country's relatively high interest rate environment.
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The survey showed that banks recorded increased demand for both secured and unsecured lending from households and businesses during the quarter. At the same time, financial institutions reported fewer loan defaults, indicating stronger repayment performance and improving asset quality.
Improved Credit Conditions
According to the CBN, the improvement in loan performance reflects stronger risk management by banks and improved repayment behaviour among borrowers.
Banks also indicated expectations of continued growth in credit demand over the coming quarters, supported by improving business activity and increased financing requirements across several sectors of the economy.
Although lending conditions remain cautious, the decline in non-performing loans is expected to strengthen banks' willingness to extend credit to qualified borrowers.
Implications for Housing Finance
The report carries positive implications for Nigeria's housing market.
Improved credit quality reduces lending risks for financial institutions and could encourage banks to expand mortgage lending, construction finance and real estate development loans. Stronger loan demand also reflects growing confidence among households and businesses seeking financing for residential and commercial property investments.
However, borrowing costs remain elevated due to prevailing interest rates, meaning affordability will continue to influence mortgage uptake and housing demand.
Why It Matters
Access to affordable finance remains one of the biggest constraints to housing delivery in Nigeria.
A banking sector with lower default rates and stronger credit performance is better positioned to support homeownership, property development and infrastructure investment. Improved lending conditions could also increase private-sector participation in affordable housing projects and urban development initiatives.
Outlook
The CBN expects credit demand to remain positive in the coming quarters. If lower default rates are sustained and macroeconomic conditions continue to stabilise, banks may become more willing to finance productive sectors, including housing, construction and real estate.
For the property market, stronger credit conditions could gradually improve access to development finance and mortgage lending, although the pace of growth will depend on future interest rate movements and broader economic conditions.
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