S&P Forecasts 25% Credit Growth for Nigerian Banks in 2026

By Adedapo Adesanya

Nigerian banks are expected to post stronger credit growth of up to 25 per cent in 2026 while retaining positive profitability, according to a new outlook by S&P Global Ratings.

In its Nigerian Banking Outlook 2026, S&P said improved lending to key sectors of the economy alongside resilient non-interest income would help banks absorb the impact of regulatory headwinds and easing interest rates.

The ratings agency projected credit growth of between 20 and 25 per cent in 2026, driven largely by increased investments in oil and gas, agriculture and manufacturing.

It added that the outlook for lending was supported by expectations of moderating inflation and gradual monetary easing, following recent interest rate cuts by the Central Bank of Nigeria (CBN).

“We expect credit growth of about 20-25 per cent supported by investments in the oil and gas, agriculture, and manufacturing sectors. Although interest rates have started to decrease, profitability should stay resilient in 2026, supported by growth in non-interest income (NII) and lower provisions.

“We expect Nigerian banks to prove resilient and capable of preserving their profitability in 2026,” S&P said, noting that earnings would be supported by transaction driven fees, commissions and a still elevated cost of risk, even as margins come under pressure.

The ratings agency noted further that it expects nominal lending growth to remain high at about 25 per cent, supported largely by investments in the oil and gas sector, agriculture and manufacturing.

S&P said Nigerian banks would continue to benefit from rates that remain high relative to peers, supporting net interest margins while interest rates are expected to decline further in 2026.

“Although interest rates have started to decline, we expect rates to remain high relative to peers, which will continue to support banks’ net interest margins through 2026.

“We forecast the average return on equity (ROE) will normalise at 20-23 per cent in 2026 compared to 25 per cent estimated for 2025, while return on assets will decline marginally to 3.0-3.1 per cent from an estimated 3.3 per cent in 2025. Profitability will be supported by still high interest margins, growing NII, and slightly lower provisions, while capital issuance will increase the equity base leading to a lower ROE.

“Although interest rates have started to decline, we expect rates to be high relative to peers, which will continue to support the banks’ net interest margins through 2026. We forecast an average margin drop of about 50bps to 100bps in 2026, as banks’ margins will continue to benefit from higher yields on government securities and large recourse to low-cost customer deposits.”