Nigeria’s private sector credit declined marginally to N77.83 trillion in May 2025, down from N77.91 trillion in April, as the Central Bank of Nigeria (CBN) sustained its tight monetary stance to combat headline inflation and stabilize the naira.
This 0.10% month-on-month decline, though seemingly marginal, continues the trend of weakened credit appetite among businesses, even as broad money supply (M3) expanded aggressively.
According to data from the CBN’s latest Money and Credit Statistics, total M3 stood at N119.01 trillion in May, indicating a robust 7.11% year-to-date increase from N111.11 trillion in January 2025.
The crossway between credit and liquidity
Despite the credit slowdown, broad money supply (M3) climbed to N119.01 trillion in May 2025, a 7.11% increase from N111.11 trillion in January and a year-on-year growth of 19.92%.
In contrast, credit to the private sector rose by just 0.58% YTD and 4.73% year-on-year, reinforcing the widening gap between system liquidity and credit allocation.
The divergence between credit and liquidity underscores a deepening credit constraint in the real economy: banks are liquid, but credit deployment remains stifled due to heightened risk assessments and elevated lending rates.
The stagnation in credit growth mirrors the impact of the CBN’s aggressive monetary tightening. Under Governor Yemi Cardoso, the apex bank implemented six consecutive Monetary Policy Rate (MPR) hikes in 2024, raising borrowing costs to curb inflation and support the naira.
While these moves were effective in containing inflationary expectations, they also made credit expensive, particularly for businesses operating on tight margins. Many have delayed capital expenditure, and banks have tightened up risk exposure, leading to muted credit expansion despite increased liquidity.
Fluctuations in Credit Trends
Recent data points to an increasingly fragile lending landscape:
- Credit jumped from N62.54 trillion in December 2023 to N76.48 trillion in January 2024, as banks ramped up lending ahead of the policy shift.
- However, following the MPR hikes, credit declined to N77.38 trillion in January 2025 and has since remained relatively flat.
- The latest drop of N77.92 billion between April and May 2025 reflects how persistent policy tightening continues to weigh on lending momentum.
Sectoral breakdown of credit
The CBN’s sectoral credit allocation report for January 2025 reveals a familiar pattern: the services sector remains the largest recipient of credit, accounting for N32.15 trillion or 54.87% of total sectoral lending.
- Finance and insurance sectors led the charge within services, claiming N7.54 trillion or 12.87% of the total.
- Meanwhile, manufacturing credit slipped for the third consecutive month to N8.31 trillion, down from N10.02 trillion in January 2024, capturing only 14.18% of sectoral credit.
- Agricultural lending edged up to N2.99 trillion (5.11%), from 4.82% in December, reflecting marginal gains from intervention funding.
- General commerce witnessed the steepest proportional decline, dropping to N3.48 trillion (5.94%) in January 2025 from N4.62 trillion (7.99%) in January 2024.
The January 2025 credit allocation snapshot shows a financial system increasingly skewed toward service-based sectors, especially finance and insurance, while the real economy—particularly manufacturing and commerce—continues to grapple with constrained access to capital.
Credit lags behind economic growth
Nigeria’s economy grew by 3.84% year-on-year in Q4 2024, outpacing the 3.46% growth rate in the prior quarter and delivering 3.4% real GDP growth for 2024, up from 2.74% in 2023.
Yet, Yet, this economic performance hasn’t translated into robust credit growth.
As of 2024, credit to the private sector accounted for just 27.81% of GDP, a sharp decline from 33.26% in 2023. This widening credit gap suggests that businesses are growing but are increasingly doing so without bank financing.
Comparatively, Sub-Saharan Africa recorded a credit-to-GDP ratio of 27.73% in 2023, according to World Bank data, a significant 8.19% increase, indicating improved access to credit across the region.
What you should know
In May 2025, private sector credit declined by N77.92 billion, marking the second consecutive month of contraction.
Year-to-date, credit has grown by only N451.15 billion, significantly trailing behind the N7.89 trillion surge in money supply.
The services sector continues to dominate credit allocation, while manufacturing and general commerce sectors have seen further declines. Meanwhile, the credit-to-GDP ratio has dropped to 27.81%, underscoring the persistent weakness in financial intermediation within Nigeria’s private sector.
Nigeria’s private sector continues to face constrained access to formal credit despite rising liquidity and solid GDP performance. T
he current credit landscape signals a financial system misaligned with the productive economy, where money supply is growing, but credit, the fuel for business growth and employment, remains restricted.
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