In January 2024, bank credit to the private sector in Nigeria surged to N76.94 trillion, marking an impressive increase of 85.2% or N35.4 trillion year-on-year (YoY) from the January 2023 figure of N41.54 trillion. According to a recent analysis of data released by the Central Bank of Nigeria (CBN), the month-on-month comparison showed a 23.06% or N14.42 trillion increase from N62.52 trillion in December 2023.
The CBN’s Money and Credit Statistics report revealed this significant uptick in credit to the private sector. A previous report by THISDAY had highlighted the growth of credit to the private sector in 2023, reaching N62.52 trillion, a YoY increase of 50.49% or N20.98 trillion from the January 2023 figure.
The surge in bank credit to the private sector in Nigeria reflects a substantial increase in lending activity, with credit reaching N76.94 trillion in January 2024. This figure represents a remarkable YoY growth of 85.2%, amounting to N35.4 trillion compared to January 2023. The CBN’s Money and Credit Statistics report indicates a robust expansion, with a notable 23.06% or N14.42 trillion increase on a month-on-month basis from the December 2023 level of N62.52 trillion.
Analysts attribute the reported N76.94 trillion in credit to the private sector to the devaluation of the naira in the foreign exchange market. Banks were reportedly extending loans to major corporations to meet the Central Bank of Nigeria’s (CBN) 65% Loan-to-Deposit Ratio (LDR) threshold. The investigation revealed that the naira closed at N1,356.88 per dollar in the Nigerian Foreign Exchange Market (NAFEM) in January 2024, compared to the N899.39 it closed at against the dollar in December 2023.
Banks have reportedly been extending loans to larger corporations, possibly taking advantage of the CBN’s policy directives and incentives to boost lending. This dynamic lending environment is occurring against the backdrop of the naira’s devaluation in the foreign exchange market. The Naira’s depreciation, as evidenced by its closure at N1,356.88 per dollar in January 2024, compared to N899.39 against the dollar in December 2023, may have influenced banks to lend to prominent entities to optimize their loan portfolios. The observed growth in credit to the private sector signals the financial industry’s responsiveness to regulatory directives and its role in stimulating economic activity through increased lending to businesses and enterprises.
