Banks’ Credit to Private Sector Drops by N1.3trn
Credit extended to Nigeria’s private sector by deposit money banks declined by N1.3 trillion over the past year, reflecting the combined impact of aggressive monetary tightening and rising borrowing costs, even as short-term fluctuations show businesses continue to rely heavily on bank financing.
Analysis of latest data from the Central Bank of Nigeria (CBN) showed that total credit to the private sector stood at N75.96 trillion in November 2024.
But as of November 2025, the credit representing the amount of borrowing to the private sector by banks stood at N74.63 trillion, representing a marginal increase from N74.41 trillion recorded in October 2025.
The contraction in private sector credit coincided with an aggressive tightening cycle by the CBN under the leadership of Governor Olayemi Cardoso, as inflation climbed to 34.6 per cent in November 2024.
Since Cardoso assumed office, the apex bank has implemented six interest rate hikes in 2024, raising the Monetary Policy Rate (MPR) by a cumulative 875 basis points.
Volatile credit trends in 2024
An analysis of CBN data shows sharp swings in private sector credit during the year. Borrowing started early in the year with N77.37 trillion in January, before dropping to N76.25 trillion in February.
However, the momentum reversed in March, when credit declined to N75.98 trillion before it recovered modestly in April reaching N78.06 trillion and by the end of May, it eased to N77.96 trillion.
It further dropped to 76.12 trillion in June 2025 but increased a little bit to N76.72 trillion and further dropped to N75.88 trillion in August.
September further witnessed a sharp drop by over N3 trillion to N72.52 trillion. October witnessed an increase of N2 trillion to hit N74.41 trillion and a mild increase to N74.63 trillion in August.
Businesses Still Borrowing Despite High Rates
Analysts say the data reflect a delicate balance between monetary restraint and economic necessity. While higher interest rates have dampened overall credit growth over the year, the rebound in November suggests that many businesses are still relying on banks’ borrowing.
With inflation still elevated and interest rates at historic highs, analysts expect credit growth to remain volatile in the near term. However, a sustained moderation in inflation could allow the CBN to gradually ease policy, potentially reviving private sector credit and supporting broader economic recovery.
For now, the N1.3 trillion decline in private sector credit over the year highlights the tangible impact of tight monetary conditions on lending, even as underlying demand for bank financing remains resilient, according to analysts.
Elsewhere, Nigeria’s broad money supply (M3) surged to N122.95 trillion in November 2025 from N119.04 trillion in October.
This analyst say signals a continued expansion in system liquidity despite the Central Bank of Nigeria’s (CBN) broadly tight monetary stance.
The increase reflects stronger domestic credit growth and improved foreign asset positions, raising questions about how the CBN manages liquidity without undermining inflation and exchange rate stability.
SOURCE: Daily Trust