Profit Without Production? Why Nigerian Banks & Central Bank Must Do More For Businesses.

A Disconnect in the Banking System

Nigeria’s banking sector continues to post record-breaking profits, yet the real economy especially small businesses and manufacturers struggles to breathe. This contradiction raises a critical question:

Are Nigerian banks financing growth or simply financing themselves?

Recent data suggests the latter may be closer to reality.

The Numbers Tell the Story: Credit to Nigeria’s private sector declined to about ₦72.5 trillion in 2025, down from earlier highs, Lending has shown a downward trend, despite policy efforts meanwhile, government borrowing is rising, encouraging banks to favor “risk-free” lending In simple terms: Banks are choosing safe profits over productive risk. Economists argue that Nigerian banks are increasingly focused on Treasury Instruments and Government Securities, avoiding SMEs due to perceived credit risk, Prioritizing short-term returns over long-term growth

An Abuja-based economist, Dr. Chika Okafor, notes: “Banks are more comfortable lending to the government than the private sector. So private sector will continue to struggle.

The SME Reality: Growth Starved of Capital

Evidence shows that Bank lending has a direct impact on SME growth yet access to credit remains one of the biggest barriers to expansion even more concerning is poor loan monitoring and lack of guidance, this often lead to business failure. But this exposes a deeper issue, financing alone is not enough, guidance is missing beyond Loans the missing Link is Banking Intelligence. Nigerian banks largely operate a Lend and Leave Model: 1. Disburse loans, 2. Demand repayment , 3. Penalize default

But modern SME financing requires more: Business Advisory Support, Cash flow planning, Financial structuring, Sectors specific insights

2. Post funding Monitoring: There is need to track utilization of funds, detect early warning signs, Prevent loan failure

3. Entrepreneur Education, Financial literacy, Management capacity building

The Missing Regulator: Where the Central Bank Must Step In.

While banks must take responsibility, the role of the Central Bank of Nigeria is critical and currently incomplete. For years, regulatory focus has leaned heavily toward recapitalization exercises which is Balance sheet strengthening, prudential ratios and compliance these are important but insufficient. A stronger banking system is meaningless if it does not translate into a stronger real economy.

What the CBN Must Now Enforce: Experts argue that the next phase of banking reform must shift from Capital adequacy to economic impact

1. Mandatory SME Lending Thresholds: CBN should require banks to allocate a defined percentage of their portfolio to manufacturing, SMEs, Agro-industrial sectors

2. Post-Loan Monitoring Frameworks: Banks should not just lend but Report utilization, Provide periodic business assessments, Show measurable impact, Embedded Business Support Services every commercial bank should maintain:

a. SME Advisory Desks and support units, b. Business Development Units, c. Financial Education d. Partner with Development Institutions.

3.  Incentives and Penalties: The Apex can Reward banks that support real sector growth,  It can penalize excessive reliance on government securities

4.  Shift From Recapitalization to Real-Sector Results: Recapitalization no doubt improves: Bank size, Shock absorption but it does not automatically improve: Industrial output, Job creation, SME survival so the focus must evolve.

There is nothing wrong with profitability. But there is a problem when Banks declare record profits while businesses face credit starvation, banking must go beyond, profit reporting to: Production financing, Enterprise development, Economic transformation.

Conclusion:  Banking must return to its core mission. It is time for a new banking mandate Nigeria cannot industrialize without financing and financing without structure, monitoring, and education will continue to fail. Banks must move from “profit declaration” to “production facilitation” and the Central Bank must enforce that transition.

Final Thought, If recapitalization builds stronger banks, then Regulation must ensure those stronger banks build a stronger economy until that happens SMEs will struggle, Manufacturing will stagnate, Growth will remain shallow, If Nigerian banks truly want to prove their strength, they must do more than publish profits. They must build businesses.Nigeria does not just need bigger banks It needs better banking

Bala Mohammed Shuts down 24 Cattle Markets: A Bold Gamble to Choke Bandit Financing in Bauchi

 

The decision by Bala Mohammed to close 24 cattle markets in Bauchi State is not just an agricultural or commercial policy, it is a calculated security strategy aimed at disrupting the economic backbone of banditry.

Across parts of northern Nigeria, cattle markets have evolved beyond simple trading hubs. In many cases, they’ve become part of an informal “shadow economy” where:

a.  Stolen livestock are quickly resold, making tracing nearly impossible

b. Cash-based transactions which allow anonymity.

c. Armed groups who exploit the system to launder money and sustain operations

By shutting these markets, the state is essentially trying to break the supply chain of banditry cutting off how criminals and kidnappers convert stolen cattle into cash and weapons.

Why This Matters

Banditry in northern Nigeria is not just about violence, it’s an economic system Groups involved rely on: Cattle rustling, Kidnapping for ransom, Illegal arms trade

Cattle markets sit at the intersection of these activities. If the markets are compromised, the entire ecosystem becomes harder to sustain.

Potential Gains

If effectively implemented, the policy could: Reduce cattle rustling by eliminating easy resale points, Disrupt cash flow to criminal networks, Force transactions into more regulated channels, Improve traceability of livestock trade

It’s a move similar to cutting off black-market fuel supplies in conflict zones you weaken the engine, not just chase the drivers.

But There Are Risks involved

This kind of sweeping shutdown comes with serious disadvantages:

1. Economic Shock to Legitimate Traders: Thousands of law-abiding herders and traders depend on these markets for survival. Closing them abruptly can: Collapse local incomes, Increase unemployment, Create resentment toward government

2. Displacement Effect: Criminal networks are adaptive. Instead of stopping, they may: Move operations to neighboring states, Shift to underground or mobile markets, Use cross-border routes

3. Trust Deficit: Without clear alternatives, citizens may see the policy as punishment rather than protection.

The Bigger Question: “If we can’t secure the marketplace, can we ever truly hope to master the market?” this hits at the core issue. Security and economics are intertwined. a dysfunctional market, Rewards illegality, Punishes compliance and  Undermine state authority. But shutting markets is only a first step, not a complete solution. What Needs to Follow

For this policy to succeed, it must be paired with:

a. Structured, monitored markets with registration and livestock tracking..

b. Digital or traceable payment systems, to reduce anonymous cash deals.

c. Regional coordination with neighboring states to prevent spillover.

d.   Security presence  in reopened or alternative markets, closing down their established trading routes will sure slow them down, but neighboring markets must be monitored.

e.     Support for affected traders.  (grants, seamless relocation strategy for legal and registered traders, formalization)

Bottom Line

Governor Bala Mohammed’s move is bold and risky. It acknowledges a hard truth: you cannot defeat insecurity without dismantling the economy that feeds it.

But success will depend on what comes next, If the shutdown is not followed by intensive reforms such as proper documentation of traders, and systems that document and monitor their daily transactions, the shadow economy won’t disappear it will simply go deeper underground.