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CBN Reports Shocking N16 Trillion Drop in Domestic Lending”

By Achimi Muktar

CBN Data Reveals Sharp Decline in Net Domestic Credit

Nigeria’s net domestic credit plummeted to N99.41 trillion in January 2025, marking a drastic drop from N115.58 trillion in November 2024—a staggering contraction of N16.17 trillion in just two months.

This was revealed in the latest Money and Credit Statistics report by the Central Bank of Nigeria (CBN), raising concerns about the tightening of credit conditions and its impact on businesses, investments, and economic growth.

Fluctuations in Nigeria’s Domestic Credit: A Look at the Numbers

The report also provides insight into domestic credit trends over the past year:

November 2023: N85.35 trillion

January 2024: N99.99 trillion

November 2024: N115.58 trillion

January 2025: N99.41 trillion

While domestic credit surged between late 2023 and late 2024, the sudden contraction in early 2025 suggests a possible credit squeeze, possibly due to tightening monetary policies, reduced borrowing, or changing fiscal strategies.

Interestingly, the CBN did not provide data for December 2024, leaving a crucial gap in understanding the movement of credit during the high-spending holiday season.

What’s Driving the Decline?

Although the CBN report does not pinpoint the exact cause, several key factors may have contributed to the credit contraction:

Monetary Tightening: The CBN may have introduced stricter lending policies to control inflation and stabilize the naira, making it harder for businesses and individuals to access credit.

Reduced Government Borrowing: The federal government’s debt management strategies might have lowered public sector borrowing.

Private Sector Hesitancy: Businesses and individuals could be adopting a cautious approach to borrowing due to economic uncertainty.

Missing December Data: The lack of figures for December 2024 raises questions about whether the decline was a direct continuation or a post-holiday market correction.

Experts React: “High Interest Rates Still Crushing Businesses”

At the 299th Monetary Policy Committee (MPC) meeting, the CBN retained the benchmark interest rate at 27.50%, a decision that drew mixed reactions from economic analysts.

Dr. Muda Yusuf, CEO of the Centre for Promotion of Private Enterprises (CPPE), acknowledged that maintaining the rate provides some relief but does not address the core issue of expensive credit.

“The impact is that it will bring some relief to businesses, especially those already indebted to banks. At least, interest rates are not increasing further,” Yusuf noted.

However, he stressed that many businesses need interest rates to come down rather than remain unchanged.

“Servicing loans at nearly 30% interest is excruciating, burdensome, and outrageous. Existing debtors are stuck because they can’t walk away from their loans. We hope that at the next MPC meeting, there will be a reduction in the MPR and Cash Reserve Ratio (CRR),” he added.

What This Means for Businesses and the Economy

A contraction in net domestic credit could mean less liquidity in the economy, potentially affecting:

Business Expansion: With less available credit, businesses may struggle to fund growth.

Investment Levels: Investors may find it harder to secure loans for new projects.

Consumer Spending: Reduced credit could slow down spending, impacting demand across industries.

Net domestic credit is a key indicator of the financial sector’s role in supporting the economy. It includes credit extended to the private sector, non-financial public sector, and other economic actors.

As Nigeria navigates these economic shifts, all eyes are on the CBN’s next policy moves—will they loosen credit restrictions, or is this the beginning of a prolonged liquidity crunch?