The Central Bank of Nigeria (CBN) has reported a significant surge of 44.8% in total credit to the Nigerian economy by the banking industry, reaching N96.2 trillion at the end of last year, according to the latest credit data.

The Money and Credit Statistics from the CBN reveal that lending to both the government and private sectors increased from N66.398 trillion in December 2022 to N92.188 trillion by the end of December 2023. This data encompasses lending by the CBN, state-owned development banks like the Bank of Industry (BoI), and smaller credit extensions by other banks, including micro-finance banks and non-interest banks.

The government saw a 36.6% rise in credit, increasing from N24.656 trillion in December 2022 to N33.669 trillion at the end of December 2023. Concurrently, lending to the private sector surged by 49.8% to N62.519 trillion, up from N41.741 trillion at the end of 2022.

As the Monetary Policy Committee (MPC) meeting approaches on February 26, analysts anticipate the CBN to maintain an aggressive stance. CBN Governor Dr. Olayemi Cardoso has signaled a commitment to tightening monetary policy to address inflation in the country.

Cardoso projects that inflation, currently at 28.92%, will average 21% this year. The CBN is focusing on traditional monetary policies to combat rising inflation, aiming for price stability that fosters sustainable economic growth.

The International Monetary Fund (IMF) has also urged the CBN to adopt an aggressive monetary policy to curb rising inflation and restore macroeconomic stability. The IMF recommends continuing to raise the monetary policy rate until it is positive in real terms.

Ayokunle Olubunmi, Head of Financial Institutions ratings at Agusto & Co, anticipates higher interest rates in Nigeria, citing the pressure on the naira due to a low-interest rate environment. There are expectations that the MPC will increase interest rates by about 500 basis points at the upcoming meeting, though concerns about high government borrowing costs may influence the decision.

The average interest rate for the year is predicted to hover around 18% (best-case scenario) and 16% as the base case scenario, with the expectation that interest rates will not decrease below 15%.

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