For every ₦1 Nigerian banks lent consumers, corporates got ₦10

Nigeria's economy is built on the backs of its millions of retail customers who trust their hard-earned money to the country's biggest banks. These everyday consumers save, transact, and bank with institutions like Access Holdings Plc, Guaranty Trust Holding Company Plc (GTCO), United Bank for Africa (UBA), and First HoldCo Plc every day. But when it comes to lending that money back out, the gap between these ordinary people and large corporations is staggering.

For every ₦1 these banks lent to retail customers, they lent about ₦10 to corporates. This 1:10 ratio reveals a banking system where millions of retail customers provide part of the deposits that fund lending, but large businesses receive most of the credit. Large corporate loans are easier to monitor and cheaper to administer than thousands of small consumer loans. But this imbalance has left a large section of consumers and small businesses underserved by formal lending, creating the gap that digital lenders and fintechs are increasingly trying to close.

The data is clear: oil and gas companies, manufacturers, and telecom operators accounted for most of the credit exposure. These large corporations have always had a disproportionate advantage when it comes to accessing credit from Nigerian banks., why? Is it because they offer more collateral? Do they have better credit histories? Or is it simply because they are viewed as less of a risk by these banks?

Limited access to credit can hinder economic growth and development by constraining investment in productive assets, stifling entrepreneurship, and impeding consumption. This is according to Enhancing Financial Inclusion and Advancement (EFInA), a financial sector organisation that tracks financial inclusion. In Nigeria, only around 6% of adults borrow from formal sources, even though over 64% of adults are financially included. This is a stark reminder of the challenges faced by small businesses and entrepreneurs who struggle to access the credit they need to grow and thrive.

In response to this imbalance, digital lenders and fintechs are increasingly trying to close the gap. By using technology to streamline the lending process and reduce the risk associated with small loans, these new players are making it easier for consumers and small businesses to access credit. But will they be able to compete with the established banks?## A New Era of Lending?

If digital lenders and fintechs are successful in closing the credit gap, it could mark a new era of lending in Nigeria. One where small businesses and entrepreneurs have equal access to credit, and where the economy is driven by a more diverse range of borrowers. But for now, the 1:10 ratio remains a stark reminder of the challenges faced by ordinary Nigerians when it comes to accessing credit from their country's biggest banks.

Nigeria's economy is built on the backs of its millions of retail customers, but when it comes to lending, the gap between these ordinary people and large corporations is staggering. Will digital lenders and fintechs be able to close the credit gap, or will the established banks continue to hold sway?