Data from the Central Bank of Nigeria has indicated that banks’ credit to the private sector dipped for the second consecutive month in February 2025.
According to the data available on the website of the CBN, credit to the private sector slid to N73.66tn in February from N74.92tn in January, indicating a 1.67 per cent decline month on month.
It is also a further decline from N75.96tn in November 2024, which was the last reported month of last year.
A closer look at the data showed that credit to the private sector had ranged between N71tn and N75tn since last year, with February 2024 being the highest at N80.86
The late passage of the 2025 budget by the Federal Government and the slow start to business activities in the year have been blamed for the consistent decline in the credit to the private sector.
However, the February Stanbic IBTC Bank Nigeria Purchasing Managers’ Index indicated the most pronounced improvement in business conditions since January 2024 and marks the third consecutive month of strengthening within the private sector.
The report indicated that the headline PMI rose to 53.7 in February from 52.0 in January, signalling a solid monthly improvement in business conditions.
Some of the key drivers of the growth include increased output, as February saw a marked increase in output, the fastest since January 2024, attributed to higher sales amid an improving demand environment.
On the other hand, credit to the government rose in February to N26.49tn from N24.52 in the previous month. It was as high as N39.62tn in November 2024, indicating an increased appetite for government financing by banks.
Credit to the private sector refers to financial resources provided by financial institutions to businesses and individuals through loans, investments, and other forms of credit.
While the high-interest rate environment in 2024 encouraged lending by the banks, it was a burden to the real sector.
The CBN Monetary Policy Committee voted to increase the Monetary Policy Rate six consecutive times in 2024, making an 875-basis point increase in MPR from 18.75 per cent in January 2024.
In its February 2025 meeting, the Central Bank of Nigeria Monetary Policy Committee decided to retain the Monetary Policy Rate at 27.50 per cent following a deceleration in inflation figures.
The National Bureau of Statistics rebased the Consumer Price Index, which saw the headline inflation for January 2025 drop to 24.48 per cent. There was a further decline in February to 23.18 per cent prompting the hold decision of the MPC.