CPPE Director Dr. Muda Yusuf Urges Recapitalized Banks To Target 30% GDP Credit To Drive Economic Transformation

Dr. Muda Yusuf of CPPE urges Nigeria's recapitalized banks to increase private sector credit to 30% of GDP to bridge the N48 trillion SME funding gap.

By: AXL Media

Published: Mar 31, 2026, 4:51 AM EDT

Source: The information in this article was sourced from LEADERSHIP

Measuring Success Beyond Financial Stability

The Centre for the Promotion of Private Enterprise (CPPE) has issued a critical assessment of the Nigerian banking sector's recapitalization exercise, which officially concludes tomorrow. Dr. Muda Yusuf, Director of the CPPE, stated that while the process has been successful in strengthening bank balance sheets without depositor losses or job cuts, the ultimate test lies in the sector's ability to support real-world economic transformation. According to Yusuf, 32 banks have met the new capital requirements as of late March 2026, marking a significant win for financial stability. However, he warned that financial strength is insufficient if it remains disconnected from the productive sectors of the Nigerian economy.

The Structural Disconnect In Private Sector Lending

In a position paper titled "Bank Recapitalisation: Strong Progress, But Urgent Need to Reconnect Banks to the Real Economy," Yusuf highlighted a persistent gap in Nigeria's credit landscape. Data from 2025 indicates that private sector credit in Nigeria stands at only 17% of GDP, significantly lower than the Sub-Saharan African average of 25%. When compared to other emerging markets like South Africa (57.5%) and Mauritius (69.8%), the disparity suggests that Nigerian banks are not yet functioning as effective engines of domestic growth. Yusuf argues that for the recapitalization to be truly meaningful, banks must ramp up lending to achieve a medium-term target of at least 30% of GDP.

Addressing The SME Financing Gap

A major point of concern raised by the CPPE is the lack of support for Small and Medium Enterprises (SMEs), which contribute approximately 50% of Nigeria's GDP and over 80% of national employment. Currently, these businesses receive only about 1% of total bank credit. Yusuf estimated that the financing gap for SMEs stands at a staggering N48 trillion. He characterized this as a "critical area of opportunity" for the newly recapitalized banks to refine their financial architecture. By failing to provide adequate capital to SMEs, the banking sector is effectively constraining the primary drivers of job creation and economic diversification.