Banks’ Credit to Private Sector Hits N76 Trillion as CBN Tightens Loan-to-Deposit Ratio

In November 2024, credit to the private sector in Nigeria surged by 27.3% year-on-year, reaching N75.96 trillion, according to the Central Bank of Nigeria’s (CBN) economic report. This growth has been linked to the CBN’s reduction of the Loan-to-Deposit Ratio (LDR) from 65% to 50%, a policy aimed at stimulating lending and controlling inflation. The move has seen banks’ foreign-denominated assets also impacted by the currency depreciation.

Meanwhile, credit to the government also hit a record high of N39.62 trillion, marking a 54.4% increase from the previous year. This reflects higher government borrowing from domestic banks to finance fiscal deficits. Additionally, broad money supply (M3) grew by 51.3% year-on-year, signaling an increase in both narrow and quasi-money supply. Analysts expect the credit to the private sector to continue rising, driven by the CBN’s stringent enforcement of the LDR. However, they caution that tightening monetary policies may slow this growth.

As part of its inflation control strategy, the CBN reduced the LDR to manage how much banks can lend, thus ensuring financial stability while curbing inflation. With inflation rates climbing to 34.6% in November, the CBN’s focus on controlling credit volume and quality is central to its broader economic goals. The central bank has emphasized that balancing credit creation with quality and targeting inflation remain key objectives in its ongoing monetary policy approach.