Nigerian commercial banks’ credit extension to the private sector declined marginally to N77.82 trillion in May 2025, representing a 0.3 percent month-on-month decrease amid the Central Bank of Nigeria’s continued monetary tightening measures.
The N260 billion reduction from April’s N78.08 trillion reflects the impact of restrictive monetary policy aimed at achieving price stability. However, year-on-year growth remained positive at 4.7 percent, representing a N3.51 trillion increase from N74.31 trillion in May 2024.
FBNQuest data reveals that private sector credit extension averaged approximately 2 percent growth over the first five months of 2025, significantly lower than the 75 percent average growth recorded in the corresponding period of 2024. This moderation aligns with CBN’s inflation-fighting strategy.
The credit growth slowdown accompanies positive inflation trends, with headline inflation declining to 22.97 percent year-on-year in May from 23.71 percent in April. This suggests CBN’s monetary tightening measures are achieving their intended price stability objectives.
Money supply growth has also moderated under the restrictive policy stance. Broad money supply (M3) and M2 both slowed to around 20 percent year-on-year in May, substantially below the 78 percent growth rate recorded in the same period last year.
Net foreign assets continued driving broad money supply growth, rising 199 percent year-on-year to N45.8 trillion in May. However, monthly net foreign assets values declined 8 percent, reflecting ongoing CBN foreign exchange market interventions amid reduced foreign portfolio inflows.
Gross external reserves have experienced pressure, falling $3.5 billion year-to-date to $37.37 billion as of June 26, 2025, before recovering slightly to $37.35 billion by July 10, 2025. This decline reflects the challenges of maintaining reserves amid global uncertainties.
Credit to the Federal Government declined 12 percent year-on-year to N25.1 trillion, aligning with CBN’s decision to end Ways and Means financing. This policy shift removes a major government funding source while supporting monetary policy objectives.
The 301st Monetary Policy Committee meeting, scheduled for July 21-22, 2025, will determine future policy direction. At its last meeting in May, the MPC unanimously maintained the Monetary Policy Rate at 27.50 percent, citing improving macroeconomic indicators and stabilizing exchange rates.
Afrinvest Securities Limited analysts expect the MPC to maintain its current policy stance despite positive signals from moderating inflation and foreign exchange market stability. External risks, food supply shocks from insecurity and flooding, and delayed GDP figures contribute to this cautious outlook.
The committee previously warned against premature policy easing, emphasizing that current foreign exchange rate stability depends on attractive Open Market Operation bill yields. Reducing interest rates too soon could disrupt recent currency stability gains.
Looking ahead, analysts expect credit growth to remain constrained under prolonged monetary tightening. This environment prioritizes price stability over credit expansion, potentially impacting private sector investment and economic growth in the near term.
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