Nigeria’s financial landscape has taken a surprising turn as net domestic credit plunged by a staggering ₦16.17 trillion in just two months from ₦115.58 trillion in November 2024 to ₦99.41 trillion in January 2025. This sharp contraction has sparked concerns about the country’s economic stability and the lending environment. In this blog, we’ll break down what’s causing this dramatic dip, its implications for businesses, consumers, and investors, and what might come next.
A Rollercoaster of Numbers: CBN’s Credit Report Tells the Story
According to the Central Bank of Nigeria’s (CBN) latest Money and Credit Statistics Report, Nigeria’s net domestic credit has experienced significant fluctuations:
- November 2023: ₦85.35 trillion
- January 2024: ₦99.99 trillion
- November 2024: ₦115.58 trillion
- January 2025: ₦99.41 trillion
The absence of December 2024 data leaves a gap in understanding whether this decline was a gradual slowdown or a sudden post-holiday slump. However, the sheer scale of this contraction suggests a substantial shift in lending activities.
Why the Decline in Net Domestic Credit?
Several factors could be driving this downturn:
Tighter Lending Regulations:
The CBN might have implemented stricter lending rules to combat rising inflation and stabilize the Naira.Reduced Government Borrowing:
A decrease in government loans could significantly impact total credit allocation.Cautious Borrowing by Businesses and Consumers:
Economic uncertainties may have led businesses and individuals to delay taking out loans.
The missing December data is a crucial piece of this puzzle, which could clarify whether the drop was a gradual decline or a sudden downturn.
What This Means for Businesses, Consumers, and Investors
For Businesses:
Higher interest rates, currently around 30%, are making loans more expensive, potentially stalling expansion plans.For Consumers:
A reduced flow of credit could tighten budgets and decrease spending power.For Investors:
The contraction in credit might signal an economic slowdown, affecting market confidence and investment decisions.
At the 299th Monetary Policy Committee (MPC) meeting, the CBN maintained interest rates at 27.50%, providing temporary relief for borrowers. However, the high loan interest rates are still a significant burden.
What’s Next? Will the CBN Ease Rates Soon?
Financial experts are watching closely, hoping for a reduction in the Monetary Policy Rate (MPR) and the Cash Reserve Ratio (CRR) in the upcoming MPC meeting. Lower rates could ease borrowing costs, boost credit flow, and stimulate economic growth.
For now, the contraction in domestic credit serves as a warning sign of tightening liquidity, which could hinder investment, business growth, and consumer spending. The big question remains; will the next MPC meeting bring relief, or should we brace for further credit contractions?