Credit extended to the private sector by Nigerian commercial banks recorded a marginal decline to N77.82 trillion in May 2025, according to data from the Central Bank of Nigeria (CBN). This represents a 0.3 percent month-on-month decrease or a N260 billion drop from the N78.08 trillion recorded in April.
However, on a year-on-year basis, credit to the private sector increased by 4.7 percent, representing a N3.51 trillion rise from N74.31 trillion recorded in the same period of 2024.
Data from FBNQuest shows that private sector credit extension (PSCE) averaged around 2 percent growth over the first five months of 2025, a significant slowdown compared to the 75 percent average growth recorded in the corresponding period of the previous year.
The moderation aligns with the CBN’s continued tight monetary policy, aimed at achieving price stability. On a month-on-month basis, PSCE declined by about N254 billion in May 2025, the report stated.
The slowdown in credit growth comes amid signs that inflation is beginning to respond to the CBN’s tightening measures. Except for a brief pause in March, inflation has been on a downward trend, with headline inflation dropping to 22.97 percent year-on-year in May from 23.71 percent in April.
Similarly, the CBN’s restrictive stance has also weighed on money supply growth. Broad money supply (M3) and M2 both slowed to around 20 percent year-on-year in May, well below the 78 percent year-on-year growth recorded in the same period last year.
Read also: Recapitalisation: Nigerian banks raise N13trn in boost for credit
Net foreign assets, however, continued to serve as a major driver of broad money supply, rising by 199 percent year-on-year to N45.8 trillion in May. Despite this, the monthly value of net foreign assets declined by 8 percent, reflecting ongoing CBN interventions in the FX market amid reduced foreign portfolio inflows due to global uncertainties.
Gross external reserves have also been on the decline, falling by $3.5 billion year-to-date to $37.37 billion as of June 26, 2025, before rebounding to $37.35 billion as of July 10, 2025.
In addition, credit to the Federal Government declined by 12 percent year-on-year to N25.1 trillion. This aligns with the CBN’s move to end Ways and Means financing, which previously served as a major funding source for the federal government.
Looking ahead, the analysts expect credit growth to remain constrained, largely due to the CBN’s prolonged monetary tightening.
The apex bank has announced that the 301st meeting of the Monetary Policy Committee (MPC) will take place on Monday, July 21, and Tuesday, July 22, 2025, at its headquarters in Abuja.
At its last meeting in May, the MPC unanimously voted to hold the Monetary Policy Rate (MPR) steady at 27.50 percent. The decision was guided by cautious optimism, as members cited improving macroeconomic indicators, narrowing exchange rate gaps, declining prices of Premium Motor Spirit (PMS), and a favourable trade balance as signs of easing inflationary pressures.
The Committee also highlighted the relative stability in the foreign exchange market and underscored the need to sustain ongoing reforms to strengthen market confidence.
Analysts at Afrinvest Securities Limited expect the MPC to maintain its policy stance, despite positive signals from moderating inflation and a stabilising FX market. They cite lingering external risks, food supply shocks resulting from recent insecurity and flooding, and uncertainty over the delayed release of rebased GDP figures for Q1 2025 as reasons for their outlook.
At the May meeting, the MPC had cautioned against premature policy easing, warning that inflationary risks remained elevated. It also stressed that the current FX rate stability was largely underpinned by the attractive yields on Open Market Operation (OMO) bills and that lowering interest rates too soon could disrupt recent currency gains.
