Nigerian Banks cut manufacturing loans by 26% amidst robust credit squeeze

Oladele Oduniyi

The Nigerian manufacturing sector is facing a significant credit crunch, with banks’ lending to the vital industry plummeting by 26% year-on-year, reaching N8 trillion in February 2025. This marks a sharp decline from the N10.9 trillion recorded in the same period last year, according to the Central Bank of Nigeria (CBN).

The CBN’s latest economic report for February 2025 reveals a persistent downward trend in credit allocation to manufacturing, extending a decline observed for two consecutive months. Month-on-month, banks’ lending to the sector fell by 2.6% to N8.309 trillion in January 2025 from N8.529 trillion in December 2024. This trend continued into February 2025, with a further 3.4% MoM contraction to N3.029 trillion.

Consequently, the manufacturing sector’s share of total private sector lending has eroded, dropping to 13.9% in February 2025. This represents a 3.8 percentage point decrease from its 17.7% share in February 2024, and a 0.3 percentage point dip from 14.2% in January 2025.

The report also indicates a robust deceleration in credit flow across key economic sectors. Total credit extended by Other Depository Corporations (ODCs) decreased by 1.12% to N57.94 trillion at the end of February 2025, down from N58.60 trillion in January 2025.

While the services sector, which holds the largest share of credit at 52.10%, experienced a 6.11% decline in credit flow during the review period, there were pockets of growth. Credit to the agriculture and industry sectors saw increases of 4.66% and 4.98%, respectively. The CBN noted that these increases signify “sustained policy support for food security and industrial growth,” with industry accounting for 42.49% of total credit and agriculture 5.41%.

Despite these targeted increases, the significant reduction in lending to manufacturing underscores growing concerns about access to finance for a sector critical to Nigeria’s economic diversification and job creation efforts.

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