…As banks’ danger urge for food wanes
Credit score to Nigeria’s non-public sector fell to an 18-month low in September 2025 as a deepening liquidity squeeze and banks’ waning urge for food curbed lending, based on new central financial institution knowledge.
The slowdown highlights how tighter funding circumstances and elevated money reserve necessities are limiting credit score flows to companies already combating rising prices and weakening demand.
Information sourced from the Central Financial institution of Nigeria (CBN) confirmed that Non-public Sector Credit score Extension (PSCE) dropped by a modest 4.35 p.c to N72.5 trillion within the interval underneath evaluation, in comparison with N75.9 trillion in August and N75.8 trillion in September of 2024.
The figures seize lending by your entire banking system, not solely deposit cash banks, which account for the majority of the full. Additionally they mirror credit score prolonged by the CBN, state-owned growth lenders such because the Financial institution of Trade, and smaller amenities supplied by non-deposit cash financial institution (DMB) monetary establishments.
The September non-public sector credit score extension places Nigeria’s credit-to-GDP ratio at 19.9 p.c, far under sub-Saharan Africa’s 2023 common of 40.6 p.c. The hole is much more pronounced in opposition to the 2024 world common of 146.2 p.c, based on the World Financial institution knowledge.
Muda Yusuf, CEO, Centre for the Promotion of Non-public Enterprise (CPPE), attributed the drop to the excessive ‘value of credit score,’ stressing that credit score circumstances within the nation are very ‘tight,’ a situation he described as slowing down development momentum in Africa’s most populous nation.
“Even with the speed minimize, the rate of interest remains to be very excessive. The tenor of funds accessible can be short-term. That’s why corporates are actually going for business papers,” Yusuf mentioned, noting that the Nigerian banking system is just not ‘doing sufficient’ in its monetary intermediation position.
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As inflation continues to melt after costs climbed to an over 28-year excessive final yr, the financial authorities slashed the benchmark rate of interest by 50 foundation factors to 27 p.c in September, marking the primary price minimize in 5 years. With costs now at their lowest in about three years, analysts see extra price cuts on the playing cards, a transfer that might enable extra credit score extension and energy development.
Money Reserve Ratio (CRR) was additionally decreased to 45 p.c from 50 p.c to permit credit score move into sectors that might engender financial development.
Nonetheless, Olusegun Sonowo, a senior banking govt, nonetheless described the credit score surroundings as essentially the most restrictive in latest reminiscence, warning that liquidity sterilisation and foreign money swings are reshaping how banks lend and worth danger, in addition to handle capital.
He defined that the CRR construction forces banks to lock up money that might ordinarily help working-capital financing, commerce credit score, and long-term capital expenditure. “If a financial institution has N1 billion and 45 p.c is sterilised by the CBN, solely N550 million is left to lend. Naturally, banks will turn out to be extra selective,” he mentioned.
He famous that the CRR regime has successfully eliminated a good portion of loanable funds from the system, squeezing banks’ liquidity positions at a time when companies most want credit score.
Sonowo emphasised that the impression of the CRR is just not solely monetary but additionally behavioural in how banks strategy asset-liability administration. He mentioned the drag on liquidity compels bankers to be extra selective in portfolio choices and extra conservative in extending amenities to sectors delicate to shocks. In his evaluation, the cumulative impact is a system that’s not solely cautious however, in lots of instances, constrained.
“When liquidity is sterilised at this scale, it impacts the capability of banks to help financial development,” he mentioned.
In the meantime, different financial aggregates, each broad cash provide (M3) and M2 cash provide, elevated by eight p.c year-on-year to N117.8 trillion every. This represents a moderation from the ten p.c year-on-year development recorded within the earlier month.
Credit score extension to the federal government declined by 39 p.c year-on-year to almost N24.2 trillion. Nonetheless, on a month-on-month foundation, it was up 5 p.c.
