Banks Lend More To Firms As CBN Holds Rates At 26.5%
Fresh monetary data from the Central Bank of Nigeria has put credit to the private sector at N83.3 trillion in June 2026, a 2.8 per cent rise from the N81 trillion recorded in May, offering the clearest sign yet that bank lending to businesses and households is recovering after a punishing first half of the year.
The figures, contained in the apex bank’s latest Money and Credit Statistics released on Wednesday, arrived barely 48 hours after the Monetary Policy Committee resolved to keep the benchmark interest rate unchanged, a decision that leaves the cost of money in Nigeria among the highest in Africa even as liquidity in the system expands.
Credit to government moved in the opposite direction, slipping 0.99 per cent to N40 trillion in June from N40.4 trillion in May. Taken together, net domestic credit climbed 1.5 per cent to N123.3 trillion from N121.42 trillion, and broad money supply rose by N4.04 trillion, or roughly 3.09 per cent, to N133.25 trillion in June from N129.21 trillion in May. The CBN attributed the liquidity expansion largely to growth in net domestic assets and quasi money, with quasi money rising to about N88.5 trillion in June from N84.6 trillion the previous month.
The monthly gain, encouraging on its own, tells only part of the story. Credit to the private sector opened the year at about N93.7 trillion in January 2026 and reached a peak of roughly N94.6 trillion in February before falling away. Measured from January to June, the aggregate is down about 11.19 per cent, a year to date contraction of more than N10 trillion. The CBN’s published series also excluded March 2026, a gap in the data that has been noted publicly and which limits any clean month by month reading of the first quarter.
That caveat matters for interpretation. What the June figure demonstrates with reasonable confidence is direction of travel over one month. What it does not yet establish is a durable reversal of the squeeze that defined the first half of 2026.
The year on year picture is steadier. Broad money stood at N117.25 trillion in June 2025, meaning liquidity has expanded by roughly N16 trillion over twelve months. Credit to government has grown far faster than credit to firms: CBN data showed government credit at N40.38 trillion in May 2026 against N22.99 trillion in May 2025, a jump of N17.39 trillion or about 75.6 per cent in one year, while private sector credit grew 0.57 per cent month on month over the same May window.
The Monetary Policy Committee concluded its 306th meeting in Abuja on July 21, retaining the Monetary Policy Rate at 26.5 per cent for the second consecutive sitting. CBN Governor Olayemi Cardoso, who chairs the committee, said all 11 members present voted for the hold.
“The committee’s decision to maintain the current policy stand follows a thorough assessment of the balance of risk. Although headline inflation moderated marginally in June 2026, global uncertainties have heightened due mainly to the renewed hostilities in the Middle East,” Cardoso said at the post meeting briefing.
He added: “In view of the evolving developments, maintaining a cautious policy stance remains appropriate.”
The committee retained the Cash Reserve Ratio at 45 per cent for deposit money banks, 16 per cent for merchant banks and 75 per cent on non TSA public sector deposits. The Standing Facilities Corridor was held at plus 50 and minus 450 basis points around the MPR, a configuration the bank has framed as a deliberate discouragement against banks parking idle funds with the regulator rather than lending them into the economy.
The rate path over the past year is instructive. The MPR stood at 27.50 per cent through the 300th and 301st meetings in May and July 2025, was trimmed by 50 basis points to 27.00 per cent in September 2025, held there in November 2025, then cut again by 50 basis points to 26.5 per cent in February 2026. It has been unchanged since.
Headline inflation eased to 15.91 per cent in June 2026 from 15.93 per cent in May, according to figures cited by the CBN. Food inflation, however, accelerated on a monthly basis to 3.75 per cent in June from 2.98 per cent in May, an indication that the disinflation now recorded at the headline level has not settled uniformly across the consumer basket.
The strongest counterweight to the June credit numbers comes from the productive sector. The Manufacturers Association of Nigeria reported that bank credit to manufacturers fell by N1.92 trillion, from N8.53 trillion in December 2024 to N6.61 trillion in December 2025, a decline of 22.5 per cent. Over the same period, the oil and gas sector attracted N10.59 trillion in bank credit and the finance sector N9.24 trillion.
MAN placed manufacturers’ average prime lending rate at about 27 per cent as of May 2026, with maximum lending rates in some commercial banks reaching 35.6 per cent. In a position paper titled “Manufacturers Association of Nigeria’s Position on The Sharp Decline in Credit To The Manufacturing Sector”, the association described the rates as exploitative.
“The primary barrier between manufacturers and financial bank liquidity is the exorbitant cost of borrowing,” the association stated.
It went further on the structural consequence: “This forces industrialists into a hostile open market where commercial lending rates soar past 35 percent. In an attempt to tame inflation by mopping up excess liquidity, this strategy inadvertently starves the supply side of the economy, leaving the nation structurally incapable of producing its way out of inflationary pressures.”
The Centre for the Promotion of Private Enterprise has framed the problem as one of transmission rather than direction. Its Chief Executive Officer, Dr Muda Yusuf, said in a policy document that easing was appropriate but constrained.
“A major concern remains the weak transmission mechanism between monetary policy adjustments and actual lending rates in the real economy. Despite reductions in the MPR, lending rates to businesses remain elevated due to structural factors including high cash reserve ratio, elevated cost of deposits, risk premiums and crowding-out effects from government borrowing,” Yusuf said.
The government’s borrowing appetite frames much of this. The 2026 Appropriation, tagged the “Budget of Consolidation, Renewed Resilience and Shared Prosperity”, carries a projected deficit of N23.85 trillion, equivalent to about 4.28 per cent of Gross Domestic Product, against projected revenue of N34.33 trillion and debt servicing of N15.52 trillion. The budget is anchored on a crude oil benchmark of 64.85 dollars per barrel, production of 1.84 million barrels per day and an exchange rate of N1,400 to the dollar.
Actual production has trailed that assumption. The National Bureau of Statistics put average daily oil output at 1.55 million barrels per day in the first quarter of 2026, below both the 1.62 million recorded in Q1 2025 and the 1.58 million in Q4 2025.
The Debt Management Office put total public debt at N159.28 trillion as of December 31, 2025, up from N144.67 trillion a year earlier, with domestic debt accounting for 53.27 per cent of the stock. Market data compiled by Cordros Securities indicated the DMO raised N7.6 trillion from domestic investors in the first half of 2026, comprising N3.18 trillion in Treasury bills and N4.42 trillion in FGN bonds, with Treasury bill issuance up 59.8 per cent year on year to N12.75 trillion and total subscriptions of N38.67 trillion, close to three times the volume offered.
That level of oversubscription is the crowding out argument in numerical form. Where risk free government paper clears at yields banks find attractive, the incentive to underwrite an unfamiliar manufacturer at a comparable or lower margin weakens considerably.
The wider economy has held up. Real GDP grew 3.89 per cent year on year in the first quarter of 2026, higher than the 3.13 per cent recorded in Q1 2025 though below the 4.07 per cent of Q4 2025. Nominal GDP stood at N110.78 trillion for the quarter and real GDP at N51.26 trillion. Agriculture grew 3.15 per cent, a sharp rebound from 0.07 per cent a year earlier, while the services sector contributed 57.73 per cent of aggregate output and the non oil economy 96.08 per cent.
External reserves have also strengthened, closing June at 51.45 billion dollars against 49.58 billion dollars at the end of May, and crossing the 52 billion dollar mark on July 20, ahead of the CBN’s own 2026 projection.
The analytical question now is whether June’s credit expansion supports output or simply adds to liquidity. Where lending outpaces the economy’s productive capacity, the inflationary consequence follows in time. Where it funds working capital, machinery and capacity utilisation, it does the opposite. On present evidence, with manufacturing credit contracting while aggregate private credit rises, the composition of lending deserves as much scrutiny as its volume.
The next test points are the July inflation print from the National Bureau of Statistics, the CBN’s July money and credit release, and whether the Federal Government proceeds with the long delayed N1 trillion Manufacturing Stabilisation Plan that MAN has continued to press for. The Monetary Policy Committee’s next scheduled meeting will indicate whether the current hold hardens into a longer pause or opens the door to further easing.