CBN data shows slowdown in credit to both government and private sector
Nigeria’s Net Domestic Credit (NDC) fell by 12.8% year-on-year in August 2025, dropping to ₦98.97 trillion, according to the latest money and credit report released by the Central Bank of Nigeria (CBN).
The NDC represents the total value of bank credit to both the public and private sectors of the economy. The decline, analysts say, reflects the impact of ongoing monetary policy easing measures introduced as part of broader efforts to stabilize the economy as inflation begins to ease.
In August 2025, bank credit to the government stood at ₦23.133 trillion, while credit to the private sector was ₦75.843 trillion, bringing the NDC to a total of ₦98.97 trillion.
Comparison with 2024 shows significant contraction
During the same period in 2024, the total NDC was higher, at ₦113.463 trillion, with bank credit to government recorded at ₦39.391 trillion and private sector credit at ₦74.072 trillion. This year’s decline represents a significant contraction in total credit volume within the financial system.
Economists have noted that the contraction in public sector borrowing may signal a shift in government financing strategy, particularly in the wake of tighter budgetary controls and reduced dependence on domestic borrowing. On the private sector side, while credit grew slightly, it was not sufficient to offset the overall drop in public borrowing.
Monthly NDC trends show volatility
A breakdown of the monthly NDC trend for 2025 reveals notable fluctuations:
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January: ₦102.406 trillion
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February: ₦103.369 trillion (up 0.9%)
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March: ₦68.177 trillion (down 34%)
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April: ₦102.002 trillion (up 49.6%)
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May: ₦100.955 trillion (down 1.03%)
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June: ₦97.787 trillion (down 3.13%)
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August: ₦98.97 trillion (up 1.2% from June)
There was no published data for July, but the overall trend suggests periods of sharp declines followed by moderate recoveries, indicating a fragile credit environment.
Experts welcome monetary easing but urge fiscal reforms
Commenting on the development, Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), commended the CBN Monetary Policy Committee (MPC) for its decision to reduce the Monetary Policy Rate (MPR). He described the move as “a welcome and timely intervention” that could stimulate credit creation in the economy.
“The lower MPR combined with a reduced Cash Reserve Ratio (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 cautioned that monetary easing alone is insufficient to address Nigeria’s economic challenges. “Fiscal authorities must prioritise infrastructure to reduce production costs, strengthen the regulatory framework, and sustain fiscal consolidation to ensure macroeconomic stability and investor confidence,” he added.
Analysts warn of weak business funding environment
David Adonri, Executive Vice Chairman at High Cap Securities Limited, raised concerns about the persistent contraction in credit. According to him, the reduced flow of funds to both public and private sectors comes at a time when businesses are already grappling with inflationary pressures, foreign exchange volatility, and weak consumer demand.
“The 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,” Adonri said.
Nigeria follows continental monetary easing trend
Nigeria’s policy shift aligns with a broader trend across Africa, where central banks are easing monetary policies as inflation cools. Recently, Ghana cut its policy rate by 350 basis points to 21.5%, while Kenya lowered its benchmark rate to 9.5% in mid-August.
Despite these moves, Nigeria’s MPR remains one of the highest in Africa, reflecting continued inflationary pressures in the domestic economy. Economists say the challenge for the CBN will be to balance the need for credit expansion with efforts to maintain price stability.
Outlook for the rest of 2025
Analysts predict that if monetary easing continues and fiscal policies become more supportive, credit growth could gradually pick up toward the end of the year. However, they warn that without structural reforms — especially in infrastructure, power, and trade logistics — the impact may remain limited.
The financial sector will also be watching how the federal government manages borrowing in the coming months, particularly as debt servicing obligations remain high and fiscal space is tight.
