Nigeria’s Net Domestic Credit (NDC) declined by 12.8 per cent year-on-year to N98.97 trillion in August 2025, reflecting the Central Bank of Nigeria’s (CBN) continued monetary policy adjustments aimed at supporting disinflation and easing liquidity pressures within the economy.
The NDC represents the total value of credit extended by banks to both the private and public sectors. The latest figures indicate a slowdown in overall credit growth when compared with the corresponding period in 2024, suggesting that policy tightening earlier in the year and cautious lending behaviour by banks have moderated credit expansion.
A sectoral breakdown of the August 2025 data shows that bank credit to government stood at N23.13 trillion, while credit to the private sector amounted to N75.84 trillion, bringing the total to N98.97 trillion. In the same month of 2024, credit to government was higher at N39.39 trillion, while private sector credit stood at N74.07 trillion, pushing total NDC to N113.46 trillion.
The year-to-date trend shows a mixed performance in domestic credit flows. In January 2025, total NDC was N102.41 trillion and rose slightly by 0.9 per cent to N103.37 trillion in February. However, by March, it declined sharply by 34 per cent to N68.18 trillion, largely due to adjustments in liquidity management by banks and reduced government borrowing.
The second quarter witnessed a rebound as the NDC rose by 49.6 per cent in April to N102.00 trillion, signalling renewed credit creation following the CBN’s decision to ease monetary conditions. But the momentum was short-lived, with NDC dipping again by 1.03 per cent to N100.96 trillion in May and by 3.13 per cent to N97.79 trillion in June. Although no data was recorded for July, the figure edged up by 1.2 per cent in August, reflecting a slight recovery in credit flows.
Economic analysts say the trend underscores the delicate balance between monetary easing and the broader fiscal environment. The CBN’s decision to reduce the Monetary Policy Rate (MPR) and lower the Cash Reserve Ratio (CRR) has been widely viewed as a positive step toward stimulating credit growth, though experts caution that the impact will depend on how fiscal policies complement these measures.
Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), described the CBN’s move as a “welcome and timely intervention” expected to improve banks’ capacity to create credit and moderate lending rates. According to him, a lower MPR, alongside a reduced CRR, will encourage financial institutions to extend more credit to productive sectors, thereby driving investment, output growth, and employment.
However, Yusuf warned that monetary tools alone cannot sustain long-term stability. He called on fiscal authorities to intensify efforts in infrastructure development, strengthen regulatory systems, and maintain fiscal discipline to create an enabling environment for private sector growth.
Similarly, financial analyst and Executive Vice Chairman of High Cap Securities Limited, David Adonri, expressed concern over the persistent contraction in credit, noting that reduced access to financing could limit business expansion and industrial productivity. He pointed out that the combination of inflationary pressures, volatile foreign exchange conditions, and weak consumer demand has already strained the economy, making consistent credit support critical for recovery.
Adonri added that Nigeria’s policy direction aligns with broader regional developments, as several African central banks have begun easing monetary policy to stimulate growth amid falling inflation rates. Ghana recently cut its policy rate by 350 basis points to 21.5 per cent, while Kenya lowered its benchmark rate to 9.5 per cent in August. Despite this, Nigeria’s MPR remains among the highest on the continent, underscoring the CBN’s cautious approach in managing inflation and maintaining currency stability.
With inflation showing signs of moderation and economic growth projected to recover modestly in the coming quarters, analysts anticipate that further coordinated policy actions between monetary and fiscal authorities could strengthen credit flows, restore investor confidence, and lay the groundwork for a more resilient financial system.
Post comments (0)