Private sector credit rises to N75.62 trillion in February

Nigeria's private sector credit expansion has hit a plateau. February 2026 saw the smallest monthly increase in nearly two years, with lending to businesses and consumers edging up just N380 billion to reach N75.62 trillion—a 0.5% monthly growth rate that underscores mounting headwinds in Africa's largest economy.

For European investors and entrepreneurs operating in Nigeria, this deceleration signals a critical inflection point. The CBN's aggressive monetary tightening campaign, designed to combat inflation that peaked above 30% in late 2025, has made borrowing prohibitively expensive for small and medium enterprises. Interest rates on corporate loans now hover between 24-32%, pricing out all but the most capital-intensive, profitable ventures. Traditional sectors like manufacturing, retail, and logistics—historically accessible to foreign-backed startups—face a credit crunch that threatens their expansion plans.

Simultaneously, the Central Bank's announcement of a N3.95 trillion Treasury Bills auction in Q2 2026 reveals a government increasingly dependent on short-term debt financing rather than revenue generation. The N750 billion net issuance target represents a deliberate strategy to manage liquidity while avoiding long-term bond commitments. This creates a bifurcated market: government securities offering attractive yields (currently 16-18% on 6-month bills), while private credit remains scarce and expensive.

The implications for European capital are nuanced. On one hand, high-yield Treasury Bills present a lower-risk entry point for risk-averse institutional investors seeking naira exposure without direct operational complexity. On the other hand, the broader economic narrative is troubling. When credit to the private sector stagnates while government debt issuance accelerates, it suggests policymakers are choosing fiscal band-aids over structural reform.

Nigeria's economic fundamentals remain sound—oil prices are stable, forex reserves exceed $38 billion, and the CBN has successfully stabilized the naira near 1,650/USD. However, private sector credit growth is the true barometer of economic health. At current rates (0.5% monthly), real credit expansion—adjusted for inflation—is negative. Businesses are not borrowing because they lack confidence in returns. Consumers are deleveraging. This contraction typically precedes broader economic slowdown.

For European entrepreneurs already invested in Nigeria, this environment demands ruthless capital discipline. Working capital finance is tightening; expansion plans should be shelved unless self-funded or backed by foreign credit lines. For those considering entry, 2026 presents a buyer's market for distressed assets but heightened execution risk.

The CBN's quarterly debt auction schedule signals confidence in government solvency, but it also hints at revenue pressures. If oil prices soften or production disruptions spike, the government could face acute refinancing risk by Q4 2026. European investors should monitor CBN foreign exchange reserves weekly and Nigerian government bond spreads against comparable African sovereigns.

The private sector credit plateau is not temporary. It reflects structural challenges—inflation expectations, currency depreciation fears, and policy uncertainty—that will take quarters to resolve.