Private sector credit slows to lowest level in five years

Growth in credit to the private sector fell sharply in 2025, rising by just 0.6 percent on average year-on-year, the slowest pace recorded in five years, underscoring persistent tightness in lending conditions despite late-year monetary adjustments. 

Data from the Central Bank of Nigeria (CBN) shows that the average credit to the private sector increased marginally to N75.86 trillion in 2025, up from N75.38 trillion in 2024.

The slowdown marks a sharp reversal from the post-2020 trend. After growing 13.3 percent in 2021 and 18.8 percent in 2022, lending accelerated rapidly through 2023 and 2024, supported by improved liquidity conditions and stronger demand for business financing. The near-flat growth recorded in 2025 suggests tightening financial conditions or a weaker appetite for business borrowing.

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Despite the slowdown, the absolute volume of credit remains at its highest level in the past five years. Total average private sector credit has more than doubled, from an average of N29.34 billion in 2020 to N75.8 billion in 2025, indicating that while expansion has stalled recently, the longer-term trend remains substantial.

However, the December data provided early signs of improvement. BusinessDay’s analysis shows that private-sector credit rose by 1.6 percent month-on-month in December, while credit to the federal government surged by nearly 30 percent, highlighting persistent crowding-out pressures. 

In its December Monetary and Credit Statistics report, analysts at FMDA research noted that “the pickup in private-sector credit supports our earlier view of cautious but sustained transmission of the corridor adjustment, even as government borrowing remained the dominant driver of domestic credit expansion.”

Although the recent narrowing of the asymmetric corridor to +50bps / –450bps in November 2025 appears to be easing lending conditions at the margin, fiscal financing needs continue to dominate credit allocation across the banking system.

Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), attributed the drop to the high ‘cost of credit,’ stressing that credit conditions in the country are very ‘tight,’ a condition he described as slowing down growth momentum in Africa’s most populous nation.

“Even with the rate cut, the interest rate is still very high. The tenor of funds available is also short-term. That’s why corporates are now going for commercial papers,” Yusuf said, noting that the Nigerian banking system is not ‘doing enough’ in its financial intermediation role.

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Analysts at Quest Merchant Bank said elevated interest rates remain a key factor behind the deceleration in credit growth to the real economy. According to them, “a major factor underscoring the contraction in credit growth to the real economy is elevated interest rates following the restrictive monetary policy stance of the monetary authorities.”

Despite the slowdown in growth, overall credit to the private sector has expanded significantly over the longer term. CBN data indicate that between 2020 and 2025, credit to the private sector rose by 161.74 percent to N911.79 trillion in 2025, from N348.36 trillion in 2020, underscoring the continued expansion of banking sector balance sheets over the period.

This dynamic has extended into the new year. At the January 2026 FGN bond auction, data from the Debt Management Office (DMO) show that the Federal Government overshot its N900 billion offer, allotting N1.54 trillion, underscoring sustained borrowing pressure that could continue to absorb system liquidity and limit the pace of private-sector credit recovery.

Over the full year, average credit to the federal government declined by 9.3 percent in 2025 to N25.13 trillion, but analysts note that borrowing accelerated sharply toward the end of the year, particularly in December, significantly outpacing private sector credit growth on a month-on-month basis. 

This late-year surge reinforces concerns that sustained fiscal borrowing remains a key constraint on a broader recovery in private-sector lending.