Nigeria’s net domestic credit declined to N99.41 trillion in January 2025, reflecting a significant contraction from N115.58 trillion recorded in November 2024.
This was disclosed in the latest Money and Credit Statistics report by the Central Bank of Nigeria (CBN).
The data further revealed that net domestic credit in January 2024 stood at N99.99 trillion, while in November 2023, it was N85.35 trillion, underscoring the fluctuations in domestic lending within the past year.
However, the CBN did not provide figures for December 2024, leaving a crucial gap in understanding credit movement during the peak holiday spending period.
Trends in Net Domestic Credit
A review of historical data shows the following trends:
- November 2023: N85.35 trillion
- January 2024: N99.99 trillion
- November 2024: N115.58 trillion
- January 2025: N99.41 trillion
The sharp decline from N115.58 trillion in November 2024 to N99.41 trillion in January 2025 suggests a contraction in domestic credit issuance, potentially due to tightening monetary policies by the apex bank or reduced borrowing demand across sectors.
Possible Drivers of the Decline
While the CBN report does not explicitly explain the reasons behind the decline, several factors could have contributed:
- Monetary Tightening: The CBN may have implemented stricter lending policies to curb inflation and stabilize the naira.
- Reduced Government Borrowing: The federal government’s fiscal stance and debt management strategies may have led to lower credit allocations.
- Private Sector Caution: Businesses and individuals could be adopting a more conservative approach to borrowing amid economic uncertainty.
- Unreported December Data: The missing December 2024 figures could hold key insights into whether the drop in January was a direct continuation of a decline or a post-holiday correction.
What you should know
At the 299th MPC meeting, the CBN retained the interest rate, at 27.50%.
- Dr. Muda Yusuf, the CEO of the Centre for Promotion of Private Enterprises (CPPE), acknowledged that while maintaining the interest rate provides temporary relief, it does not solve the fundamental problem of expensive credit.
“The impact is that it will bring some relief to businesses, especially those that are already indebted to banks. At least, interest rates are not increasing further,” Yusuf noted.
However, the desire of many businesses is that the rate should be reduced. It is not just about pausing the rate but actually decreasing it because servicing loans at nearly 30% interest is excruciating, burdensome, and outrageous.
“Those who are already indebted are the worst hit because they cannot walk away from the loan. Fresh borrowers can choose whether or not to take a loan, but existing debtors are stuck. We hope that at the next MPC meeting, there will be some relaxation of these rates. We want to see a drop in the MPR and the Cash Reserve Ratio (CRR),” he added.
A contraction in net domestic credit could signal reduced liquidity in the economy, affecting investment, business expansion, and consumer spending.
Net domestic credit is the total amount of credit that the financial sector provides to the economy. It includes credit to the private sector, the non-financial public sector, and other accounts.