The Central Bank of Nigeria (CBN) says credit to the economy has fallen by 1.5% to N102.7tn.
The apex bank made this known in its latest Money and Credit Statistics Data.
It said the decline was driven by 1.6 per cent MoM fall in Credit to the private sector as well as 1.2 per cent, MoM decline in credit to the government.
According to the CBN, Credit to the Government fell month-on-month, MoM, by 1.2 per cent to N28.05 trillion in June from N28.4 trillion in May 2024.
According to CBN, credit to the private sector also declined MoM by 1.6 per cent to N73.1 trillion in June from N74.3 trillion in May.
The decline reflects the impact of measures by the CBN to reduce money supply in order to curb rising inflation.
These measures include a hike in the Monetary Policy Rate, MPR, which is the benchmark interest rate. The CBN also jerked up the Cash Reserve Ratio, CRR, of banks to 45 per cent in February from 32.5 per cent.
While the interest rate hikes of the CBN has been severely criticised by the business community, analysts expect the apex bank to sustain the hikes, though at a slower pace, in the second half of the year.
Making this projection, analysts at Cowry Assets Management Limited, said: “Within the last five months in 2024, the Central Bank of Nigeria has raised key monetary policy rates by 750bps to 26.25 per cent from 18.75 per cent between February and May 2024 in its efforts to subdue inflationary pressure.
“The muted complaints by real sector operators on the effect of the high interest rates on their business viability has turned into a wailing with the biggest industrialist in Nigeria Mr. Aliko Dangote openly complaining that the current high interest rate environment is stifling productive activities.
“The CBN Governor, obviously in response to Mr. Dangote’s complaint, stated through the Deputy Governor, Financial Stability, Mr. Phillip Ikeazor, that it will soon be able to slow down increases in the benchmark interest rate.
“A deeper look at the inflation trend indicates a gradual month-on-month deceleration in the headline index within the last three months which may be a pointer to a near term reduction in headline inflation rates.
“Based on the above factors, we project a moderate hike of between 25bps and 75bps in benchmark rates in H2’24 to avoid tipping the economy into negative growth territory.”