Credit to Nigeria’s private sector posted a modest increase in February 2026, offering a tentative sign of recovery in lending activity, but the broader trend still points to a banking system under strain from high interest rates, tight liquidity conditions, and rising government demand for domestic funds.
Latest monetary and credit statistics from the Central Bank of Nigeria (CBN) show that credit to the private sector rose slightly to N75.62 trillion in February, from N75.24 trillion in January, an increase of N380 billion month-on-month.
The uptick is modest, but it comes after a weak start to the year and may suggest that the CBN’s recent monetary easing is beginning to filter gradually into the credit market.
Still, the bigger picture remains far less encouraging. On a year-on-year basis, private sector credit remains below the N76.26 trillion recorded in February 2025, indicating that businesses and households are still borrowing less than they were a year earlier.
The data also underscores how far lending has retreated from its recent peak. Private sector credit had climbed to N78.07 trillion in April 2025 before sliding steadily through the second half of the year, eventually touching a low of N72.53 trillion in September 2025.
That pattern reflects the lagged impact of aggressive monetary tightening and a banking sector that has remained highly selective in extending fresh loans. The February rise, therefore, should be read less as a full recovery and more as an early stabilization signal. What stands out more sharply in the latest figures is the divergence between lending to the private sector and lending to government.
Net domestic credit expanded to N111.40 trillion, up from N109.43 trillion in January, largely driven by a significant jump in public sector borrowing. Credit to the government climbed to N35.77 trillion, from N34.19 trillion in the previous month. This sharp increase reinforces a concern that has increasingly dominated economic analysis in recent months: the crowding-out effect.
As government borrowing intensifies, particularly through the domestic banking system, a larger share of available liquidity is absorbed by sovereign financing needs, leaving less room for productive private sector lending. Several analysts have already warned that this trend is constraining the real economy, particularly manufacturers, SMEs, and consumer-facing businesses that depend heavily on bank financing.
In effect, banks may be finding it more attractive and less risky to lend to the government than to businesses operating in an uncertain macroeconomic environment.
That preference is understandable from a balance-sheet perspective. Government securities and public sector exposures generally carry lower default risk and stronger regulatory treatment than private loans, especially in a high-rate environment where businesses face pressure from inflation, exchange-rate swings, and weak consumer demand.
The monetary backdrop remains a critical part of the story. In February 2026, the CBN cut the Monetary Policy Rate by 50 basis points to 26.5 per cent, marking a cautious shift toward easing after months of tight policy. The apex bank, however, retained the Cash Reserve Ratio at 45 per cent for commercial banks and kept the liquidity ratio at 30 per cent, meaning overall system liquidity remains relatively tight.
This mixed policy stance helps explain why credit recovery has been slow. While the rate cut should theoretically reduce borrowing costs, the still-elevated CRR continues to sterilize a substantial portion of bank deposits, limiting the amount of funds available for lending.
In practical terms, banks are still operating in a restrictive liquidity environment even as benchmark rates begin to ease. That transmission problem has been a recurring weakness in Nigeria’s monetary framework.
The Centre for the Promotion of Private Enterprise (CPPE) and other market analysts have repeatedly warned that monetary easing alone may not translate quickly into stronger lending without deeper structural reforms in credit allocation and risk pricing. The challenge is particularly acute for small and medium-sized enterprises, which often face the highest borrowing costs and toughest collateral requirements.
Another important context is the money supply.
Nigeria’s broad money supply (M3) declined marginally to N123.15 trillion in February, from N123.36 trillion in January, suggesting that liquidity expansion in the wider economy remains subdued. A slower growth in money supply, combined with high reserve requirements and elevated lending rates, tends to suppress credit growth even when policy rates are cut.
That said, there are tentative reasons for cautious optimism. Disinflation has continued for several months, external reserves have improved, and the banking recapitalization exercise, which saw 33 banks meet revised capital thresholds, could strengthen the sector’s capacity to lend over the medium term.
If macroeconomic stability continues to improve, especially on inflation and foreign exchange, banks may gradually become more willing to extend credit to productive sectors. For now, however, the February figures tell a more nuanced story: while lending is no longer deteriorating as sharply as before, the recovery remains fragile and uneven.
