BY BLAISE UDUNZE
Nigeria’s banking industry appears to be booming, largely driven by the policies of the Central Bank of Nigeria (CBN), under Governor Olayemi Cardoso, while the real economy continues to suffocate.
At a time when millions of Nigerians are sinking deeper into poverty, when inflation continues to erode household incomes, when businesses are collapsing under unbearable operating costs, and when migration has become a survival strategy for many young professionals, Nigerian banks are announcing staggering profits, stronger capital positions and unprecedented liquidity growth.
According to the bank’s financial statements, the financial system appears healthy. In reality, the economy where citizens work, trade and survive is gasping for breath.
This growing disconnect between financial sector prosperity and economic suffering now represents one of the gravest threats to Nigeria’s long-term economic stability and its ambition of building a $1 trillion economy.
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The numbers are indeed impressive. Nigerian banks’ shareholders’ funds reportedly surged to about N27 trillion following the recapitalisation exercise. The top five banks now command balance sheets estimated at over N164 trillion. Tier-1 banks collectively generated trillions in profits within the first quarter of 2026 alone, while the sector-wide recapitalisation exercise raised over N4.56 trillion.
Ordinarily, such figures should inspire confidence about the future of the economy. Stronger banks are expected to translate into stronger businesses, more jobs, industrial expansion and wider economic opportunities. But Nigeria’s experience is proving otherwise.
Instead of serving as engines of productive growth, banks are increasingly becoming custodians of liquidity trapped within the financial system itself. That is the real danger.
Even as banking liquidity expands sharply, lending to the productive economy remains weak and constrained. Reports indicate that banks parked a record N24.13 trillion with the CBN, while simultaneously increasing investments in government securities and treasury bills because these avenues are safer, more profitable and less risky than lending to businesses operating within Nigeria’s harsh economic climate. This reality exposes a dangerous contradiction.
A developing economy desperately in need of industrialisation, manufacturing growth, infrastructure expansion and job creation cannot afford a banking system that prefers financial safety over productive economic risk.
A sustainable economy cannot thrive where the real sector is starved of funds. Yet this is exactly where Nigeria now stands.
Despite the massive liquidity in the banking system, growth in lending to the private sector continues to lag behind the pace of liquidity expansion. The implication is clear. Financial sector strength is no longer translating into real economic development. This is not how healthy economies function.
Ordinarily, banks in developing economies are expected to operate as catalysts for economic transformation. Across successful economies, commercial banks finance manufacturing, agriculture, innovation, infrastructure and entrepreneurship because those sectors generate jobs, productivity and national wealth.
