The Central Bank of Nigeria (CBN) has issued a warning to banks against excessive concentration of loans in specific borrowers, sectors, geographic regions, and asset classes. This move aims to prevent such exposures from undermining the resilience of financial institutions. The warning comes after the banking sector successfully raised N4.65 trillion through a recapitalisation programme.
According to CBN director, Banking Supervision, Dr Olubukola Akinwunmi, banks must strengthen their capacity to identify, measure, monitor, and control concentration risks as they enter the post-recapitalisation era. A diversified loan portfolio is crucial in defending against financial shocks. The CBN has designed regulations to limit excessive dependence on single obligors, connected counterparties, and economic sectors.
The Nigeria Economic Summit Group (NESG) reported that the services sector dominated bank lending in the first half of 2026, accounting for 58.4 percent of total bank credit. This represents an increase from 55.7 percent in the first half of 2025. The Oil and Gas sector accounted for 27.8 percent, while the Non-Oil Industrial sector accounted for 6.7 percent of bank credit.
The NESG also noted that the Agriculture sector received 7.1 percent of bank credit, while Manufacturing received 8.3 percent. The construction and real estate sectors received relatively smaller shares of 4.6 percent and 1.6 percent, respectively.
Dr Akinwunmi emphasized that banks are required to establish internal exposure limits, conduct periodic stress tests, and incorporate concentration risk assessments into their Internal Capital Adequacy Assessment Process (ICAAP). He warned that heavy exposure to certain sectors could leave banks vulnerable to sector-specific shocks.
The CBN's new risk-based supervisory framework will link the level of capital required by a bank to the risks it assumes. Institutions with excessive concentration risks may be required to maintain additional capital. This move aims to prevent rising non-performing loans, increased provisioning, capital erosion, and liquidity pressures.
The warning comes as the banking industry completes a recapitalisation programme launched in March 2024, which resulted in approximately N4.65 trillion in fresh capital being mobilised. Dr Akinwunmi noted that recapitalisation provides a stronger foundation, but lasting financial stability depends on effective risk management and regulatory oversight.
Key points
- CBN warns banks against excessive loan concentration to prevent financial shocks.
- Banks must strengthen their capacity to identify and manage concentration risks.
- The new risk-based supervisory framework will link capital requirements to risks assumed by banks.
