SAT JUNE 27 2026-theGBJournal| Nigeria’s private sector credit growth remained subdued in May despite a sharp expansion in money supply, underscoring the lingering impact of the Central Bank of Nigeria’s (CBN) tight monetary stance as lenders continued to favour government borrowing over corporate lending.
Data released by the CBN showed credit to the private sector edged up just 0.6% month-on-month to N81.04 trillion from N80.59 trillion in April, while lending to the government climbed 2.0% to N40.38 trillion, highlighting stronger demand for domestic financing to plug the fiscal deficit.
Meanwhile, broad money supply (M3) expanded 3.4% to N129.21 trillion, driven by increases in both narrow money and quasi-money, suggesting liquidity continued to build within the financial system even as elevated interest rates restrained the flow of credit to businesses.
The modest increase in private sector lending reflects the continued effect of the CBN’s restrictive monetary policy, with high borrowing costs discouraging businesses from taking on new debt and banks remaining selective in extending credit.
Analysts tells theG&BJournal that in contrast, the stronger growth in government borrowing points to sustained reliance on the domestic banking system to finance fiscal obligations, a trend that risks crowding out private investment if maintained over a prolonged period.
The expansion in broad money supply was supported by a 2.0% rise in narrow money and a stronger 4.1% increase in quasi-money, indicating that growth was driven largely by higher savings and deposit balances rather than an acceleration in transactional liquidity.
This, according to analysts, suggests households and businesses continue to accumulate financial assets even as credit creation remains restrained.
Currency in circulation also rose 0.8% month-on-month to N5.69 trillion from N5.65 trillion in April, signalling resilient cash demand despite the CBN’s efforts to deepen electronic payments.
The increase points to sustained nominal spending and the continued dominance of cash transactions across Nigeria’s large informal economy, where electronic payment infrastructure remains uneven.
Taken together, the latest monetary aggregates paint a picture of an economy where liquidity is expanding but credit transmission to productive sectors remains weak.
Unless inflation eases sufficiently to create room for monetary policy loosening, analysts expect private sector borrowing to remain constrained, while government demand for domestic financing is likely to continue absorbing a significant share of banking sector liquidity.
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