Lagos, Nigeria – New data from the Central Bank of Nigeria (CBN) reveals the significant role banks play in driving the nation’s economy, with nearly three-quarters of their lending directed towards the private sector. This underscores the banking industry’s position as a crucial financial engine for businesses and individual economic activities.
As of the end of February 2025, CBN figures indicate that credit extended by banks to the private sector (CPS) reached a substantial N73.66 trillion. This is significantly higher than the N26.5 trillion loaned to the public sector during the same period.
The report highlights a modest increase in CPS, rising by 3.4 percent from N71.21 trillion in February 2024 to the current N73.66 trillion. This continued growth, albeit at a slower pace, suggests the private sector remains a key recipient of bank financing.
Conversely, lending to the government saw a more significant jump, increasing by 35.2 percent to N26.5 trillion in February 2025, compared to N19.59 trillion in the corresponding period last year. This increase reflects a greater reliance on domestic bank borrowing by the government to fund its operations and address potential deficits.
Analysts suggest the slower growth in private sector lending can be attributed to the stabilization of the naira. The previous rapid depreciation of the currency had inflated the value of banks’ foreign currency-denominated assets, leading to higher loan figures. With the naira now relatively more stable, this effect has diminished.
On a month-on-month basis, however, there was a slight dip in credit to the private sector, falling by 1.7 percent from N74.91 trillion in January 2025. This decrease may reflect the impact of the CBN’s current tight monetary policy aimed at controlling inflation.
Looking ahead, analysts at Cordros Securities anticipate a potential shift towards monetary policy easing at the next Monetary Policy Committee (MPC) meeting in May. They believe this could stimulate further growth in lending to the private sector. However, they also caution that the growth rate is likely to remain lower than the previous year as the impact of currency depreciation continues to wane.
In other financial market developments, the Treasury bills secondary market experienced a downturn last week as investors anticipated higher stop rates at the primary market auction. This led to an increase in the average yield by 85 basis points to 21.7 percent.
Meanwhile, the FGN bond secondary market saw positive activity, with the average yield declining by 3 basis points to 18.7 percent. This was partly attributed to investors who missed out on the primary market auction seeking opportunities in the secondary market.
Overall, the CBN data underscores the critical role of Nigerian banks in financing the private sector, which is widely considered the engine of economic growth. While government borrowing has increased, the vast majority of bank lending continues to support businesses and individuals, highlighting the banking sector’s importance to national economic development.
CBN DATA: Banks Fuel Private Sector Growth with Lion’s Share of Loans
