Between January and May 2026, credit to Nigeria’s private sector fell from N93.74 trillion to N81.04 trillion, a decline of 14% in five months. Over the same period, credit to the government rose from N37.87 trillion to N40.38 trillion. The direction of both movements tells the same story: Nigerian banks are pulling back from businesses and parking more money in government securities instead.
The Central Bank of Nigeria’s money and credit statistics, from which these figures are drawn, show that private sector credit peaked at N94.6 trillion in February before the contraction set in. The CBN excluded March data from its published statistics without explanation, creating a gap in the monthly picture.
Analysts point to three converging factors behind the decline. Rising credit risk and concerns about non-performing loans have made banks more cautious about extending credit to private borrowers. Economic uncertainty has compounded that caution. And government securities, which carry no default risk and currently offer attractive yields in a high interest rate environment, have provided banks with a comfortable alternative to the harder work of lending to businesses.
David Adnori of Highcap Securities confirmed that excess liquidity is flowing toward risk-free government instruments, describing it as a predictable banking behaviour rather than a crisis response. Predictable it may be, but the consequences for the broader economy are not neutral. Research consistently links private sector credit growth to GDP expansion. A 14% contraction in lending to businesses over five months, sustained into the second half of the year, is not a rounding error.
Cordros Capital analysts warned that the trend may persist. The CBN’s reinforcement of the loans-to-deposits macro-prudential ratio, a measure designed to encourage lending, may instead be pushing banks toward caution on risky assets in the short to medium term, they said.
The distributional dimension of the problem is equally pressing. Muda Yusuf of the Centre for the Promotion of Private Enterprise noted that even when credit does reach the private sector, it tends to concentrate in large companies and low-risk borrowers. Small businesses, which contribute disproportionately to employment and economic inclusion, are the least likely to benefit. Sectors with the highest potential for job creation, including agriculture, manufacturing, real estate, and construction, remain underserved.
Tight monetary policy was always going to carry a cost. The CBN’s rate decisions were designed to contain inflation, and they have done that work with some effect. But the credit contraction now visible in the data is the other side of that calculation, and it is falling unevenly on the part of the economy least equipped to absorb it.
