By Seun Ibiyemi
Nigeria’s credit to the private sector recorded a modest rebound in October, rising to N74.41 trillion from N72.53 trillion in September, signaling renewed lending activity following a five-year high interest rate environment.
The increase comes after private sector credit had fallen to an 18-month low in September, according to the latest data from the Central Bank of Nigeria (CBN).
The report showed that bank reserves declined from N34.67 trillion in September to N31.58 trillion, an 8.9 percent month-on-month decrease, reflecting an expansion in liquidity through credit flows rather than accumulation of reserves.
Analysts attribute the renewed lending appetite to the CBN’s recent monetary policy adjustments. At its September Monetary Policy Committee (MPC) meeting, the central bank cut the benchmark interest rate by 50 basis points to 27 percent, the first reduction in five years, in a bid to stimulate growth as inflation cooled to 16 percent for the seventh consecutive month.
In November, the MPC kept the key rate unchanged but widened the asymmetric corridor around the Monetary Policy Rate (MPR) to +50/-450 basis points from +250/-250 basis points, a move interpreted as a subtle easing measure.
“The cheaper access to the CBN’s lending window and the sharply lower remuneration for deposits will discourage banks from sterilising funds and could push more liquidity into the interbank market,” analysts at Lagos-based FMDA said in a note. They added that the adjustments are likely to support further credit expansion in November and December.
The MPC also reduced the Standing Deposit Facility (SDF) rate by 200 basis points to 22.5 percent and the Standing Lending Facility (SLF) from 29.5 percent to 27.5 percent. The moves are intended to discourage banks from parking excess liquidity with the CBN while encouraging lending to the real sector.
According to analysts at FBNQuest Merchant Bank, the corridor adjustment “complements the MPC’s anti-inflation stance by supporting investment and productive activities without signalling strong monetary easing,” suggesting a balanced approach to stimulating economic activity while maintaining price stability.
The rebound in private sector credit is being closely watched as a potential catalyst for renewed investment, economic growth, and increased support for businesses across Nigeria.