Nigerian banks tightened their lending purse strings at the dawn of 2026, as fresh data from the Central Bank of Nigeria (CBN) revealed a noticeable dip in credit extended to the private sector.
According to the latest monetary and credit statistics, private sector credit contracted to N75.24 trillion in January 2026, down from N75.83 trillion in December 2025—a decline of approximately N590 billion, or roughly 0.78% month-on-month.
This pullback marks a cautious start to the year for Nigeria’s banking sector, which has navigated a volatile lending landscape amid prolonged high interest rates, lingering economic uncertainties, and a historical preference for safer government securities.
Private sector credit—encompassing loans, advances, non-equity securities, trade credits, and accounts receivable granted to businesses and households—had peaked at N78.07 trillion in April 2025 before embarking on a downward trajectory through much of the year.
The 12-month low hit N72.53 trillion in September 2025, underscoring the uneven recovery in credit flows following aggressive monetary tightening in prior periods.
On a year-on-year basis, the January 2026 figure of N75.24 trillion remains below the N77.38 trillion recorded in January 2025, highlighting that lending has yet to regain its earlier momentum.
The data signal a banking industry still operating in a measured mode, with lenders exercising prudence in extending fresh credit despite signals from policymakers of a gradual pivot toward easing.
The contraction in private sector lending did not occur in isolation. Broader credit conditions across the economy showed similar restraint: Net Domestic Credit (NDC) eased to N109.43 trillion in January from N110.06 trillion the previous month.
Net credit to the government dipped marginally to N34.19 trillion from N34.22 trillion, reflecting subdued borrowing appetite from the public sector in the opening month. More strikingly, Nigeria’s broad money supply (M3) contracted to N123.36 trillion from N124.4 trillion in December—a decline that points to deliberate liquidity tightening by the CBN.
Recent reports indicate the apex bank withdrew a substantial N13.41 trillion from the financial system in January 2026 through various open market operations, nearly five times the amount mopped up in the corresponding period of the prior year.
This aggressive liquidity management, combined with persistently elevated interest rates earlier in the cycle, has contributed to tighter conditions that discourage aggressive lending to the real economy.
Analysts attribute the measured lending stance to several factors: high borrowing costs that have deterred many businesses, perceived risks in certain sectors amid economic headwinds, and banks’ continued heavy exposure to government securities offering attractive yields with lower default risk. The dominance of public sector borrowing in recent years has also crowded out private access to credit, a trend that persisted into 2025 and appears to carry over.
However, context is emerging of a policy shift. The CBN’s Monetary Policy Committee, in its February 2026 meeting, reduced the benchmark Monetary Policy Rate (MPR) by 50 basis points to 26.5%—the second such cut following an initial reduction in late 2025—citing moderating inflation (which eased to around 15.10% in January) and improving macroeconomic stability. While this move aims to lower borrowing costs and stimulate credit growth over time, the January data suggest transmission remains lagged, with banks yet to fully translate policy signals into expanded private lending.
For Nigeria’s private sector—already grappling with subdued activity as evidenced by a dip in the Purchasing Managers’ Index below the 50-point expansion threshold in January—the early-year credit slowdown raises questions about the pace of recovery in key areas such as manufacturing, agriculture, and small-to-medium enterprises.
In the near term, the figures reinforce that while headline inflation has begun to cool and policy easing is underway, the credit channel to the real economy continues to face headwinds, underscoring the delicate balance Nigeria’s monetary authorities must strike between inflation control and growth support.
WHAT YOU SHOULD KNOW
Nigerian banks significantly tightened private sector lending at the start of 2026, with credit dropping by N590 billion to N75.24 trillion in January. The key takeaway is that despite the CBN beginning to ease monetary policy, credit conditions remain tight, liquidity is being actively drained, and banks are still very cautious about extending loans to businesses and households.
