Demand for loans from Nigerian households and businesses strengthened in the second quarter of 2026 as banks increased credit availability and recorded a decline in loan defaults across major lending categories, according to the Central Bank of Nigeria (CBN). The development was contained in the apex bank’s latest Credit Conditions Survey, which provides an assessment of lending trends across the banking sector, including credit supply, loan demand, approval rates, interest rate spreads and default levels. According to the report, banks eased lending conditions for corporate, secured and unsecured loans during the quarter, while the performance of existing loans improved as fewer borrowers defaulted. The survey also indicated that lenders approved a larger proportion of loan applications compared with the previous quarter, suggesting stronger confidence in borrowers and improving expectations about economic conditions. Credit availability improves across major loan categories The CBN reported that credit availability increased across all major lending segments in the second quarter. Secured lending recorded the strongest improvement, with credit availability rising by 25.2 index points. Corporate lending followed with an increase of 20.4 index points, while unsecured lending recorded a more modest rise of 10.5 index points. The increase in credit supply was accompanied by stronger demand for loans, particularly from households seeking secured financing and businesses requiring corporate credit. Demand for secured loans increased to 15.1 index points during the quarter, while demand for corporate loans rose to 15.2 index points. However, demand for unsecured lending remained relatively weak, recording -1.2 index points. The CBN said loan demand strengthened across virtually all categories, with the exception of borrowing by other financial corporations, where demand remained broadly unchanged. Banks approve more loan applications The improvement in lending conditions was also reflected in loan approval rates. Banks reported higher approval rates for secured, unsecured and corporate loan applications compared with the first quarter of 2026. The trend suggests that lenders were more willing to extend credit as economic conditions improved and liquidity conditions became more favourable. For secured lending, the CBN attributed the expansion in credit supply largely to improving economic conditions, banks’ efforts to increase market share and better liquidity conditions. The combination of stronger demand and increased credit availability could provide additional support for businesses and households that require financing for investment, working capital and consumption. Loan defaults decline One of the more positive developments highlighted by the survey was the decline in default rates across the major lending categories. Banks reported lower default rates on secured and unsecured loans, while defaults also declined among different categories of corporate borrowers. The improvement covered small businesses, medium-sized private non-financial corporations, large private non-financial corporations and other financial corporations. The report said, “In Q2 2026, the spread on unsecured lending rates relative to the Monetary Policy Rate (MPR) narrowed to 7.8 index points. However, the spreads on secured lending rates to households widened with -4.5 index points. “For corporate lending, spreads narrowed for Other Financial Corporations (OFCs), medium PNFCs and large PNFCs, and at 14.0, 5.0 and 4.7 index points, respectively. Conversely, the spread for small businesses widened at -3.8 index points.” The decline in defaults could indicate an improvement in borrowers’ ability to service their obligations, although the broader lending environment remains challenging due to elevated interest rates and persistent inflationary pressures. Interest rate spreads narrow The survey also showed changes in the pricing of bank credit during the quarter, with interest rate spreads narrowing across most lending categories. The spread on unsecured household lending relative to the Monetary Policy Rate (MPR) narrowed to 7.8 index points. For corporate borrowers, lending spreads narrowed to 14.0 index points for other financial corporations, 5.0 index points for medium-sized private non-financial corporations and 4.7 index points for large private non-financial corporations. However, not all borrowers benefited from lower spreads. The interest rate spread for small businesses widened to -3.8 index points, while the spread on secured household lending widened by 4.5 index points relative to the MPR. These variations suggest that lending conditions continued to differ significantly depending on the type of borrower and the nature of the credit being accessed. Private sector credit continues to grow The latest survey comes against the backdrop of rising private-sector credit.
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