Credit to Nigeria’s private sector declined by about N103 trillion over seven months, falling from N93.74 trillion in January to N83.43 trillion as of July this year, according to the money and credit statistics data reviewed by Daily Trust.
The figures showed significant fluctuations in credit levels during the seven-month period, highlighting changes in lending activity within the economy
Daily Trust reports that the CPS includes loans, trade credits and other account receivables and supports provided by banks to the private sector within a period
At the beginning of the year in January, credit to the private sector stood at N9374 trillion. It rose to N94.6 trillion in February.
The figure has however declined to N8343 trillion as of July 2026, representing a reduction of N10.31 trillion, or about 11 per cent year-to-date, as the data by the Central Bank of Nigeria (CBN) showed.
The contraction means that credit available to private-sector businesses and other borrowers fell substantially within the period, potentially putting pressure on companies that depend on bank financing to fund working capital, expansion and investment
The data also showed that the decline was not uniform throughout the seven months From January 2026 when it started with N93.74 trillion and rose to N94.61 trillion in the subsequent month, the data has seen a significant contraction.
From February, it came down to N805 trillion in April, went up to N81.04 in May; N83.2 trillion in June and 83.4 trillion in July.
Despite the fluctuations, the seven-month movement from N9374 trillion to N83.43 trillion represents a substantial contraction in the level of credit recorded between the two points.
Our correspondent however reports that year-in-year, the credit rose by 921 per cent from July 2025 when it was N76.72 trillion.
This represents an increase of approximately N671 trillion, or 9.21 per cent, within one year.
Credit remains an important component of economic activity because businesses rely on financing to purchase equipment, maintain inventories, pay workers, expand operations and invest in new projects For smaller businesses in particular, access to affordable financing can determine their ability to sustain operations and grow.
A reduction in available credit could therefore affect business expansion and investment if the decline reflects weaker lending activity or reduced demand for loans
Analysts say movements in private-sector credit can be influenced by several factors, including new lending, loan repayments, interest rates, exchange-rate movements, credit restructuring and changes in the classification or valuation of loans
This was the situation of the banking sector in 2026 as virtually all deposit money banks (DMBs) did a loan restructuring despite the huge capital raised during the just concluded banking sector recapitalistion
Our correspondent reports that no fewer than 33 lenders raised N465trillion at the end of the recapitalisation exercise as announced by the CBN in April.
Recently at the 19th Annual Banking and Finance Conference of the Chartered Institute of Bankers of Nigeria (CIBN), President Bola Ahmed Tinubu tasked Nigerian banks to move beyond celebrating huge profits and shareholder dividends to financing productive sectors of the economy
He said: “For years, we have measured financial institutions by balance-sheet growth, profitability and shareholder returns These remain important. But we must increasingly ask: what is the financial system doing for the real economy?
“A resilient banking system cannot exist indefinitely where businesses cannot obtain affordable credit, manufacturers struggle to finance expansion, and millions of productive MSMEs remain outside the formal financial system
“This requires us to rethink risk The safest loan on an individual bank’s balance sheet is not necessarily the best allocation of capital for the economy.”
Expert explains drop in banks’ lending
A financial expert, Prof Adebayo Adams explained that the decline in credit to Nigeria’s private sector should not be interpreted as a collapse in bank lending but rather as a shift in banks’ lending portfolios amid rising concerns over non-performing loans and continuing economic uncertainty, an economic expert has said.
According to the expert, Nigerian banks are becoming increasingly cautious in extending credit as they assess the ability of businesses and other borrowers to repay loans in an uncertain economic environment
He said the high rate of non-performing loans was also influencing banks’ lending decisions, encouraging financial institutions to become more selective about the sectors and businesses to which they extend credit
“It is not necessarily that banks are no longer lending It is more of a portfolio shift. Banks are becoming more conscious because of the risks associated with non-performing loans and the prevailing economic uncertainty,” he said.
The expert also identified the high cost of borrowing as a major factor affecting private-sector demand for credit
He said the cost of funds had become excessively high for many businesses, particularly manufacturers and factories that require substantial financing to expand production
“Factories cannot expand at this cost of borrowing Businesses are struggling with financing costs, and that is one of the reasons private-sector credit has fallen,” he said.
He warned that the development could have significant consequences for the wider economy if businesses continue to reduce investment because of expensive credit
According to him, manufacturers require affordable and predictable financing to increase production capacity, purchase equipment, employ more workers and expand their operations
Without such financing, he said, many businesses could be forced to scale back investment or, in some cases, shut down
“It is going to have a negative impact on the economy A lot of industries and manufacturers may crash. We are not producing; we are only forecasting. The prices of goods would be very, very exorbitant,” he said.
The expert argued that declining productive investment could worsen Nigeria’s dependence on imported goods and place additional pressure on prices
He also maintained that recent macroeconomic stabilisation had yet to translate into broad-based improvements in productivity, employment and welfare
“Macroeconomic stabilisation has not led to broad-based improvement in productivity, employment and welfare,” he said, stressing that improvements in headline economic indicators would have limited impact if businesses and households continued to face difficult operating and financing conditions
He called for measures that would reduce the cost of borrowing and improve the operating environment for businesses