Access to credit remains the lifeblood of business growth, but securing the right finance remains a hurdle many of them struggle to surmount.

In a rapidly changing environment, supporting local businesses ranging from artisans to large-scale manufacturers is an essential foundation for any economy that wants to experience sustainable growth and development.

This is especially true for the small, medium, and large enterprises that form the pillars of the nation?s economy, particularly when helping them turn their business investment dreams into reality.

Findings show that governments and financial institutions have been at the forefront of helping these businesses thrive, although they are still faced with rigorous evaluation and financial challenges.

Besides, securing financing is a critical step toward growth, yet this path is often blocked by a central hurdle ? the assessment of credit risk, an evaluator that enables financial institutions to make informed decisions when giving loans.

Credit experts explained that understanding credit risk assessment is important in achieving effective risk management in the industry.

They said that credit risk assessment is not a barrier to lending; it is an essential guardrail that protects both the bank and the borrower.

It is a sophisticated, multi-layered process that leverages advanced technology and expert human analysis to evaluate a business?s financial health, operational model, and market potential, they said.

?Credit risk assessment manages and mitigates potential financial losses due to extending credit to other businesses.

?This process evaluates the likelihood of a borrower, which could be another company or business entity, failing to meet its financial obligations.

?It is an essential step for financial institutions and companies before engaging in credit transactions,? they said.

A financial Chief Risk Officer at a leading financial institution emphasised: ?A thorough credit assessment is the cornerstone of responsible banking. It ensures that loans are granted on a sustainable basis, setting businesses up for success rather than over-indebtedness.

?This rigorous due diligence fosters a stable financial environment where credible businesses can thrive with confidence.?

This process is designed to be meticulous for a reason: to identify viable enterprises and ensure that the capital entrusted to them is deployed in a manner that fuels genuine, lasting growth.

Other industry experts said that, beyond the balance sheet, the role of reputation is key.

They said: ?Additionally, credit risks look beyond paperwork and documentation.

?Financial institutions are now placing greater emphasis on borrowers? reputations and operational strength when making lending decisions.

?Lenders increasingly evaluate a company?s proven track record, including the quality of its financial management, the reliability of its products or services, and its consistent history of honouring commitments.

?A strong record of on-time repayments, disciplined financial controls, and transparent, well-governed operations significantly improves a borrower?s ability to obtain financing.?

Other industry reports on non-performing loans showed that the Nigerian banking sector has made significant strides in strengthening its financial health.

This improvement is a direct result of enhanced risk management frameworks, proactive recovery initiatives, and stricter adherence to regulatory standards.

A top bank recorded an NPL ratio of approximately 2.8 per cent in its Q3 2025 financial report, demonstrating superior asset quality and leadership among Tier-1 peers through aggressive loan recoveries and strong coverage.

Another tier-1 bank reported NPLs of around 3.0 per cent, marking a continued decline from prior periods via write-offs and portfolio monitoring, supporting sustained profitability with a ROAE above 25 per cent.

A first generation saw its NPL ratio improve to approximately 8.5 per cent, a reduction from earlier highs.

However, it remains elevated and highlights the need for ongoing enhancements in risk frameworks and impairment strategies.

One tier-one bank noted an NPL ratio of 4.5 per cent, reflecting positive momentum with improved coverage at 146.9per cent, even as the loan book expanded 20.5per cent to N3.36tn.

Another one reported NPLs of about 5.6 per cent, maintaining stability amid 10 per cent loan growth and economic headwinds, with coverage at around 58 per cent, bolstering resilience.

One bank experienced an NPL ratio of around 5.3 per cent at the group level (proxy for Nigeria operations), benefiting from remediation programs that reduced ratios from 6.7 per cent in December 2024.

A bank recorded an NPL ratio of approximately 4.2 per cent in its H1 2025 financial report, with a management target below five per cent for the full year, supported by effective write-backs and resilient asset quality amid strong profit growth.

The stabilising NPL landscape across these institutions points to a maturing banking sector response to challenges, with the average NPL rate across Nigerian banks estimated at around 5.0per cent as of Q3 2025.

This progress reinforces the critical role of effective credit risk assessment strategies in maintaining financial stability and fostering long-term economic growth.

While 11 banks exceeded the 5per cent threshold in April 2025 (pushing the industry average to 5.62per cent), subsequent reports show stabilisation or declines, with IMF projections at 4.5per cent (expected to rise modestly).

High impairment charges (N1.96tn across the top 8 banks in 9M 2025) signal caution, but effective risk management has mitigated systemic risks.

Rigorous due diligence and ?enhanced credit assessments? remain vital, especially for outliers, but the sector?s average stability (projected ~3.8-4.5per cent for full-year 2025) suggests improved resilience.

Against this backdrop, the deliberate commitment by financial institutions to provide funding, particularly to SMEs and locally owned enterprises, directly accelerates domestic production and strengthens Nigerian-made goods and services, giving real momentum to the ?Made in Nigeria? agenda, a vital engine of economic growth.

Banks recognise that prioritising local businesses not only delivers broader economic gains but also builds a more resilient and stable banking sector.

By channelling resources into sustainable, well-structured lending practices, financial institutions can drive innovation, job creation, and long-term prosperity for home-grown enterprises.

In the end, a thriving ecosystem that provides local businesses with accessible financing and genuine community commitment is indispensable for sustained national economic growth.

As banks refine their approach to credit-risk evaluation, their efforts do more than safeguard individual enterprises; they strengthen the foundations of a healthier, more prosperous Nigerian economy for the long term. (The Nation)

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