Private sector credit growth stalls as tight monetary policies weigh on Nigeria’s economy

Credit to Nigeria’s private sector stood at ₦76.27 trillion in March 2025, reflecting a marginal uptick of just 0.03% compared to ₦76.25 trillion recorded in February 2025, according to the latest figures released by the Central Bank of Nigeria (CBN).

Despite this slight monthly increase, the figure remains below the ₦77.38 trillion reported in January 2025, underscoring a broader trend of credit tightening.

Over the first quarter of 2025, private sector credit shrank by ₦1.11 trillion, highlighting the cautious approach adopted by financial institutions amid evolving macroeconomic pressures, including aggressive monetary policy tightening, surging interest rates, and persistent inflationary challenges.

The CBN’s Money and Credit Statistics report points to a sluggish credit expansion that may be linked to growing concerns over elevated non-performing loans (NPLs), subdued consumer demand, and a tough business environment that has made banks increasingly risk-averse.

Although the apex bank has yet to release detailed sectoral credit allocations for March 2025, earlier reports indicate that credit flows have remained concentrated in key sectors such as manufacturing, general commerce, and oil and gas.

According to the CBN’s Economic Report for January, the services sector held the largest share of sectoral credit at 54.87%, followed by the industry sector at 40.02%, and agriculture at 5.11%—a slight rise compared to 4.82% in December 2024.

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Economic analysts attribute the weak credit performance to a combination of demand- and supply-side constraints. On the demand side, businesses are shying away from borrowing due to the high cost of funds.

On the supply side, banks are implementing stricter lending standards driven by heightened credit risk concerns and a lack of access to stable, long-term funding.

The decline in private sector credit coincides with the CBN’s hawkish monetary posture, aimed at reining in inflation and stabilizing the naira.

The apex bank’s benchmark Monetary Policy Rate (MPR), which currently stands at 27.5%, has further increased borrowing costs, dampening private sector appetite for new loans.

Analysts warn that the slowdown in private sector credit could have wider economic implications. With the private sector playing a dominant role in Nigeria’s economic activity, restricted access to credit may stifle investments, hinder job creation, and slow down GDP growth prospects.

Although the federal government has rolled out intervention programs—including the recently inaugurated Nigerian Consumer Credit Corporation—their impact has so far been modest in the face of broader monetary tightening.

Financial sector stakeholders are calling for more targeted reforms to ease access to credit, particularly for Micro, Small, and Medium Enterprises (MSMEs) and other productive sectors.

Proposed measures include establishing stronger credit guarantee schemes, offering regulatory incentives to banks, and introducing more effective risk-sharing frameworks to unlock new lending opportunities and revitalize economic growth.

As Nigeria grapples with the dual challenge of monetary stability and economic expansion, policymakers face mounting pressure to strike a balance that fosters sustainable credit growth without compromising inflation control efforts.