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Amid lingering uncertainty in the global energy market, ten prominent Nigerian banks aggressively scaled down their credit exposure to the oil and gas sector during the 2025 financial year. Data from the banks’ audited results revealed a 13.4% contraction in sector exposure, dropping to ₦12.22 trillion from the ₦15.7 trillion recorded in 2024.

This strategic pullback reflects heightened caution among financial institutions as the oil and gas sector continued to act as a significant driver of non-performing loans (NPLs) and loan loss provisions, compelling banks to heavily shield their balance sheets in line with Central Bank of Nigeria – CBN prudential guidelines.

The retrenchment was particularly evident among the country’s tier-1 banking giants. Zenith Bank led the reduction with a sharp 36.8% drop in sector exposure to ₦2.59 trillion, a move that successfully cut its oil-related NPL contribution from 30.5% in 2024 down to 14.2% in 2025. Similarly, Fidelity Bank saw its exposure drop marginally to ₦1.91 trillion as part of a wider contraction in its net loan book.

Conversely, Guaranty Trust Holding Company – GTCO bucked the trend by increasing its exposure by 39% to ₦1.59 trillion, driven primarily by expanded credit allocation to the upstream and natural gas sub-sectors.

Despite the targeted reduction in energy loans, the banking sector’s overall credit creation remained robust. Total gross loans and advances from these ten banks across all sectors expanded by 14.7% to close 2025 at ₦56.05 trillion, up from ₦48.9 trillion the previous year.

Access Holdings anchored this credit expansion, leading the charts with ₦13.69 trillion in total gross loans. Within this larger lending ecosystem, the oil and gas industry retained a powerful, albeit diminished, footprint, accounting for roughly 21.8% of the banks’ aggregate loan books.

The financial adjustments occurred against a backdrop of complex global and local energy dynamics. Globally, Brent crude averaged $68.16 per barrel, sustained by geopolitical tensions and sanctions on Russian and Iranian oil, which offset supply additions from OPEC+ and softer economic growth.

Locally, Nigeria’s crude production hovered between 1.6 and 1.7 million barrels per day (mbpd) for most of the year. However, a late-year decline left overall output significantly below the government’s 2.12 mbpd budget benchmark, threatening the Federal Government’s ability to meet its 2025 revenue targets.

From a broader economic perspective, the National Bureau of Statistics – NBS reported that the oil sector’s overall contribution to real GDP improved slightly to 3.53% in 2025, compared to 3.38% in 2024. Fourth-quarter real growth spiked by 6.79% year-on-year, showing considerable resilience despite operational challenges and pipeline vandalism.

However, structural headwinds persisted as analysts noted that ongoing geopolitical shifts, including the Russia-Ukraine war, altered global trade flows and dampened traditional demand for Nigerian crude in vital Asian markets like India.

Ultimately, the banking industry’s tactical shift highlights a delicate balancing act between capital preservation and economic growth. While lenders maintained a highly disciplined approach toward upstream operators, market experts emphasize that financial institutions cannot simply abandon the energy space.

With International Oil Companies – IOCs divesting from onshore assets, domestic operators require substantial capital. Financial analysts conclude that despite ongoing foreign and domestic risks, the oil and gas sector remains too lucrative and systematically vital for Nigerian banks to ignore entirely.