By Juliet Ezeh
Nigeria’s tight monetary policy and high borrowing costs have significantly reduced household borrowing, with total consumer credit dropping to N3.19tn as many Nigerians cut back on loans amid elevated interest rates.
Data from the Central Bank of Nigeria Economic Report for November 2025 showed that consumer credit declined sharply from N4.42tn recorded in November 2024, reflecting weaker demand for loans across the country.
The contraction in credit comes after months of aggressive anti-inflation policies implemented by the apex bank. For most of 2025, the Central Bank of Nigeria maintained a tight monetary stance, keeping borrowing costs high in an effort to curb inflation.
During the period, the Monetary Policy Committee retained the Monetary Policy Rate at 27.5 per cent for much of the year before implementing a modest reduction to 27 per cent in September 2025. The committee later maintained the rate at the November meeting, signalling continued caution despite signs of easing inflation.
High interest rates typically discourage fresh borrowing, particularly among households and small businesses, while encouraging existing borrowers to repay outstanding debts more quickly.
The report showed that although personal loans remained the dominant form of consumer borrowing, their share declined as households reduced exposure to unsecured credit. Personal loans accounted for 62.38 per cent of total consumer credit at N1.99tn, while retail loans represented 37.62 per cent valued at N1.20tn.
Economic analysts say the trend reflects the pressure many households face under high lending rates and rising living costs, forcing borrowers to prioritise repayment rather than taking on new debt.
However, recent policy signals suggest a gradual easing of monetary conditions. At its February 2026 meeting, the Monetary Policy Committee reduced the benchmark interest rate to 26.5 per cent, citing sustained disinflation, exchange rate stability and improving external reserves.
The Governor of the Central Bank of Nigeria, Olayemi Cardoso, said the committee’s decision followed a careful assessment of economic conditions.
According to him, Nigeria’s headline inflation eased to 15.10 per cent in January 2026 from 15.15 per cent recorded in December 2025, marking the eleventh consecutive month of year-on-year decline.
Food inflation also dropped significantly to 8.89 per cent from 10.84 per cent, while core inflation moderated to 17.72 per cent from 18.63 per cent during the same period.
Cardoso noted that Nigeria’s external sector has also strengthened, with gross external reserves rising to $50.45bn as of February 16, 2026, the highest level recorded in 13 years. The reserves provide an import cover of about 9.68 months for goods and services.
Despite the improving macroeconomic indicators, the apex bank warned that fiscal pressures, including election-related spending, could still pose risks to the inflation outlook.
The Central Bank of Nigeria said it would continue to rely on an evidence-based policy framework aimed at maintaining price stability while safeguarding the resilience of the country’s financial system.
Juliet Ezeh is the founder and chief reporter at Westbridge Reporters with over 7 years of experience in journalism. She covers crime, industry, policy, and social developments, delivering timely and accurate reporting.