Bank Credit to Private Sector Declines to N75.83trn
Bank credit to Nigeria’s private sector fell to N75.83tn in August 2025, the lowest level recorded this year, according to the Central Bank of Nigeria’s latest money and credit statistics.
The figure represents a 0.4 per cent decline from N76.14trn in June 2025, underscoring a steady slowdown in credit expansion.
On a year-on-year basis, the August 2025 figure was 1.5 per cent higher than the N74.73trn recorded in August 2024, showing only a modest improvement compared with last year.
Net domestic credit stood at N98.97tn in August 2025, lower than N99.86tn in June and well below the N105.88tn recorded in August 2024, reflecting a broad contraction in credit across the economy.
Monthly trends show that credit to the private sector was relatively strong at the start of 2025, with N77.38trn in January. It slipped to N76.26tn in February and N75.98tn in March before climbing to N78.08tn in April, the year’s peak. From May, the numbers weakened: credit fell to N77.83tn, dropped again to N76.14tn in June, and eventually slid to N75.83tn in August, marking a clear downward trajectory.
Government borrowing has also been more subdued. Credit to the government was N23.13tn in August 2025, slightly down from N23.73tn in June and significantly lower than the N31.15tn recorded in August 2024, reflecting a sharp contraction in bank lending to the public sector.
The decline in private sector credit mirrors tighter monetary conditions. For most of 2025, the CBN maintained the Monetary Policy Rate at 27.5 per cent to curb inflation and stabilise the naira. The high borrowing costs discouraged fresh lending, pushing companies and households to cut back on debt.
In the first half of the year alone, private sector loans shrank by nearly N1.9tn, a trend linked to high interest rates and tight liquidity in the banking system.
In September 2025, the Monetary Policy Committee implemented its first rate cut since 2020, trimming the policy rate to 27 per cent. The decision followed signs of easing inflation, which stood at 20.12 per cent in August, and the need to stimulate growth. The committee also reduced the Cash Reserve Ratio for commercial banks from 50 to 45 per cent, while tightening rules on public sector deposits by raising their reserve ratio to 75 per cent.
The persistent contraction in credit raises concerns about business funding at a time when inflation, foreign exchange pressures, and weak consumer demand are already squeezing the economy.
Nigeria’s move is part of a wider continental trend. Central banks in Africa are beginning to ease monetary policy as inflation cools. Recently, Ghana slashed its policy rate by 350 basis points to 21.5 per cent, while Kenya lowered its benchmark rate to 9.5 per cent in mid-August.
Nigeria’s MPR remains among the highest in Africa, reflecting sustained inflationary pressures. However, analysts see the slight easing as a shift in strategy, from crisis containment to cautious stimulus.
While welcoming the rate cut, members of the Organised Private Sector argued that the reduction remains marginal and insufficient to ease the credit squeeze on manufacturers and SMEs.
The Director-General of the Manufacturers Association of Nigeria, Segun Ajayi-Kadir, described the cut as “welcome but inadequate.”
“Virtually every time the MPC meets, what we anticipate is a reduction in rates. This is welcome, but it has not gotten us anywhere near our expectations. Manufacturers need to borrow at no more than five per cent for that borrowing to be supportive of production,” he said.
Ajayi-Kadir stressed that no bank would lend at a rate below the MPR, making credit costs still unaffordable.
“It signals a rethinking by the CBN, but manufacturers still await a time when rates will be significantly lower,” he added.
The Centre for the Promotion of Private Enterprise echoed similar views. Its Director, Dr Muda Yusuf, commended the MPC’s decision but emphasised the need for complementary fiscal reforms.
He described the move as “a welcome and timely intervention,” adding that the lower MPR combined with a reduced CRR should expand banks’ capacity to create credit and ease lending rates.
“This will support business expansion, stimulate output growth, and create jobs,” Yusuf said.
However, he warned that monetary easing alone is insufficient: “Fiscal authorities must prioritise infrastructure to reduce production costs, strengthen the regulatory framework, and sustain fiscal consolidation to ensure macroeconomic stability and investor confidence.”