•Trend contradicts super-liquid banking sector
•Government credit sees over 65% year-on-year expansion
•Manufacturing sector’s contribution to GDP rises but still less than 10%

Despite a sharp spike in liquidity in the banking system, lenders may be scaling down funding to the private sector as the total credit dipped by 14.8 per cent or N14 trillion in two months, from February to April.

This may suggest a continuous neglect of the critical sector in capital allocation or aggressive liquidation of existing contracts. Either possibility could mean a cut in investment, undermining efforts to create more jobs and increase the speed of growth of the economy.

The banking sector clawed back N4.65 trillion through fresh capital raises in the past two years. With much of the funds sourced from the local market, the sector would have crowded out other critical sectors in its drive to meet new capital thresholds.

The recapitalisation has significantly increased system liquidity and supposedly increased the capacity of the lenders to fund the economy, especially the private sector.

In contrast, private sector funding is faltering just when the sector has ramped up recapitalisation.

The Guardian had reported that the real sector, which offers huge credit opportunities, would require significant de-risking, including policy realignment, fiscal incentives, infrastructure upgrade, and efficient power, among others, to benefit from what appears like excess liquidity in the banking sector.

With the general elections less than a year away, rising political risk has complicated the inefficiency crisis facing the private sector. This could significantly increase the risk premium of the real private sector.

Not surprisingly, the sector credit balances, as of April, dropped significantly to N80.59 trillion, almost 15 per cent down from the all-time high of N94.61 trillion recorded at the end of February.

The figure, contained in the money and credit statistics of the Central Bank, had recorded a consistent year-on-year growth up till February, when it rose by 24 per cent or N18.34 trillion.

Sadly, the credit government maintained its moderate but steady growth, hitting N39.6 trillion as of April and narrowing the historical wide gap with the total private sector credit.

The former had grown by 65.5 per cent year-on-year as of April. But the most critical private sector credit regrettably regressed to 2.4 per cent after the April sharp drop.

Private sector credit is key for job expansion and economic growth as it facilitates new plant establishment, expansion, household consumption and other critical investments that support economic activities.

Poor funding continues to impact the real sector of the economy negatively. In the first quarter, the manufacturing sector’s contribution to real output stood at 9.57 per cent.

The latest figures represent a slight decline from the 9.62 per cent contribution recorded in the corresponding quarter of 2025, but a significant improvement over the 7.4 per cent posted in Q4.

The National Bureau of Statistics (NBS) reported that the real sector recorded stronger year-on-year and quarter-on-quarter growth during the first quarter of 2026.

Real GDP growth of the manufacturing sector stood at 3.29 per cent year-on-year in Q1, surpassing the corresponding quarter of 2025 and the preceding quarter by 1.6 percentage points and 2.17 percentage points, respectively.

Quarter-on-quarter growth in the sector was estimated at 3.59 per cent, indicating a gradual recovery in industrial activity.

Nominal GDP growth of manufacturing stood at 10.22 per cent year-on-year in Q1 2026, compared to 5.8 per cent recorded in the preceding quarter.

The report also showed that the sector contributed 10.08 per cent to nominal GDP in Q1, compared to 10.78 per cent in the corresponding quarter of 2025 and 8.34 per cent in Q4.