Credit to Nigeria’s private sector fell to N72.5 trillion in September 2025, marking a notable decline from N75.9 trillion recorded in August, despite recent monetary policy easing by the Central Bank of Nigeria (CBN) aimed at stimulating lending and business growth.
This is according to the latest data published by the CBN.
This marks the sixth time this year that lending to businesses and individuals has declined.
According to the data, credit to the private sector peaked at N78.1 trillion in April 2025. However, the downward trend began earlier in the year, with total private sector credit dropping from N77.3 trillion in January to N76.3 trillion in February 2025, signaling the start of a gradual decline that has persisted in subsequent months.
The downward trend persisted in March, with private sector credit falling further to N75.9 trillion. Although there was a brief rebound in April to N78.1 trillion, the recovery proved short-lived as credit levels declined again in May and June 2025.
The CBN did not release data for July 2025.
However, the repeated monthly declines in 2025 raise concerns over potential liquidity constraints, reduced lending appetite by banks, or waning credit demand from the private sector amid tight economic conditions.
Government borrowing on the rise
While credit to the private sector dropped, credit to the government increased to N24.15 trillion in September, up from N22.95 trillion in August — a jump of over N1.2 trillion within one month.
This reflects the government’s continued dependence on domestic borrowing to finance budgetary shortfalls and support public sector obligations amid weak revenue performance.
Analysts say the sharp contrast between declining private sector lending and rising government borrowing reflects a “crowding-out effect”, where banks prefer to lend to the government through treasury instruments rather than to businesses, due to the former’s lower risk and guaranteed returns.
“Banks seem to be more comfortable lending to the government than to the private sector because of the risk-free nature of sovereign instruments. Until credit risk conditions improve, the private sector will continue to struggle to access affordable financing,” said an Abuja-based economist, Dr. Chika Okafor.
Rate cuts not yet translating to real sector growth
The CBN has, in recent months, pursued a more accommodative monetary stance, cutting its Monetary Policy Rate (MPR) to 27% to encourage lending and stimulate growth amid slowing economic recovery.
However, the latest credit data suggests that the impact of these measures is yet to be felt in the real economy.
Economic experts argue that structural bottlenecks, high inflation, and currency volatility have continued to deter commercial banks from expanding credit to the private sector. Businesses, especially small and medium enterprises (SMEs), also face steep borrowing costs despite lower policy rates, limiting their ability to invest and expand operations.
“The CBN’s policy rate cuts are well-intentioned, but transmission into private sector credit is weak due to structural inefficiencies in the banking sector. High inflation and forex instability still drive up effective lending rates,” said financial analyst, Bamidele Akinola.
What this means
The contraction in private sector credit raises concerns about Nigeria’s near-term growth prospects. Private businesses , which account for an overwhelming portion of employment and economic activity, rely heavily on credit to sustain production, pay wages, and invest in expansion.
Experts warn that continued decline in private sector lending could slow GDP growth, undermine job creation, and worsen inflationary pressures by limiting supply-side productivity.
“Without robust credit flow to productive sectors, the economy risks stagnation. Growth driven solely by government borrowing is unsustainable,” noted policy consultant, Dr. Grace Onyekachi.
What you should know
At its 302nd meeting in Abuja, the CBN reduced the MPR by 50 basis points, bringing it down from 27.5% to 27%.
In addition, the MPC adjusted the asymmetric corridor around the benchmark rate to +250/-250 basis points, compared to the previous +500/-100 basis points.
The Committee retained the Cash Reserve Ratio (CRR) for commercial banks at 45 per cent, while that of merchant banks was set at 16 per cent.
