The Central Bank of Nigeria (CBN) has revealed a significant decline in consumer credit provided by commercial banks, while government borrowing from the same banks has surged to unprecedented levels. The findings were published in the apex bank’s October 2024 monthly report, highlighting contrasting trends in lending activities.
Sharp Decline in Consumer Credit
Consumer credit fell by 17.6% month-on-month (MoM), dropping from ₦4.25 trillion in September 2024 to ₦3.5 trillion in October. Personal loans, which make up the largest share of consumer credit, experienced a steep 23.5% decline, falling from ₦3.15 trillion to ₦2.41 trillion. Retail loans also showed a marginal decrease of 0.91%, reducing from ₦1.1 trillion to ₦1.09 trillion.
Despite the monthly decline, consumer credit increased by 6.06% year-on-year (YoY), reflecting growth compared to October 2023.
Breakdown of Consumer Credit
In October 2024, personal loans accounted for 68.95% of total consumer credit, a decline from 74.14% in September. Retail loans made up the remaining 31.05%, reflecting a slight increase in their relative share of the total.
Record-High Government Borrowing
In contrast to the decline in consumer loans, government borrowing from commercial banks soared to a record ₦42 trillion in September 2024, representing an 89.8% YoY increase from ₦22.13 trillion in September 2023. On a monthly basis, credit to the government rose sharply by 34.86%, up from ₦31.15 trillion in August 2024.
This increase highlights the government’s growing reliance on domestic banks for funding through avenues such as bonds and other debt instruments.
Implications of Rising Government Borrowing
The surge in government borrowing underscores a shift in financial priorities, with resources increasingly directed toward public debt rather than private sector credit. While these funds often support infrastructure projects and budget deficit financing, the trend could pose long-term risks to economic stability. The increased focus on government debt might limit the availability of funds for private sector development, potentially impacting overall economic growth.
Broader Economic Context
The CBN has recently adjusted interest rates for Nigerian banks, influencing lending terms for both private and government borrowers. The apex bank has urged banks to maintain a balance between financing public debt and supporting private sector lending to ensure sustainable economic growth.
This latest report highlights a critical juncture for Nigeria’s financial system, as the nation grapples with rising national debt and shifting credit dynamics. Stakeholders will closely monitor these trends for their impact on the economy and the stability of the financial sector.
