By: ThinkBusiness Africa
Nigerian businesses significantly ramped up their borrowing activities in the final quarter of 2025, with corporate credit demand climbing to a net balance of 12.4 index points. This surge in appetite for capital follows a 50 basis point reduction in the country’s monetary policy rate, as the Central Bank of Nigeria (CBN) moved to stimulate a resilient but credit-starved economy.
The spike in borrowing comes on the heels of the CBN’s first major rate cut in years. In September 2025, the Monetary Policy Committee (MPC) lowered the benchmark Monetary Policy Rate (MPR) by 50 basis points to 27%. While high by global standards, the move signaled a “recalibration toward growth” after a punishing cycle of six consecutive hikes in 2024 that had pushed rates as high as 27.5%.
According to the CBN’s latest Q4 2025 Credit Conditions Survey Report, this policy easing—combined with a drop in the Cash Reserve Requirement (CRR) from 50% to 45%—successfully unlocked liquidity within the banking sector. Lenders reported that the overall supply of corporate credit rose to 21.3 index points, the highest level of the year.
The report identifies two primary engines behind the 12.4-point demand index:
- Inventory Finance (26.2): Businesses aggressively stocked up for the year-end festive season and positioned themselves for 2026.
- Capital Investments (20.8): Firms moved beyond survival mode, seeking loans for infrastructure and equipment to capitalize on a stabilizing macroeconomic environment.
Small and large enterprises were the primary beneficiaries of this shift. For small businesses in particular, interest rate “spreads” (the difference between what banks pay for deposits and what they charge for loans) narrowed by 14.8 points, making credit more affordable than it had been in over a year.
The increased borrowing aligns with broader economic indicators. Nigeria’s GDP expanded by 4.23% in mid-2025, outperforming conservative forecasts from the IMF. Inflation, which had peaked 34%, also showed signs of cooling, easing to 14.45% November, and 15.5% in December 2025.
Commercial banks are chasing market share again, reflecting the survey’s finding that market share objectives (17.0) were a top reason for the increased loan availability.
For the first time since the 2024 currency reforms, Nigerians are seeing a convergence of lower inflation, a stabilized Naira (trading around N1,420/$), and the central bank is willing to let the economy breathe.
However, the credit boom is not without its risks. Despite the surge in borrowing, the CBN report flagged a worrying trend: higher default rates across all corporate categories.
- Large Corporations saw the sharpest rise in defaults with an index of -6.0.
- Small Businesses followed at -3.9.
Lenders warn that while the “rate cut” has opened the taps, the high cost of operations—including energy prices and previous currency volatility—continues to strain the repayment capacity of many firms.
As Nigeria enters 2026, the Q4 data suggests a business community eager to expand but still walking a tightrope. With corporate loan approvals jumping by 26.1 points, the highest in five years, the “credit tap” is officially open. The challenge for the coming year will be ensuring that this new wave of debt fuels productive growth rather than a spike in non-performing loans.
