…as Private sector credit growth slows
Credit extended to the Federal Government by the banking sector surged by 75.6 per cent year-on-year to N40.38 trillion in May 2026, underscoring the government’s growing reliance on domestic borrowing despite prevailing tight monetary conditions.
Latest monetary and credit statistics released by the Central Bank of Nigeria (CBN) showed that total credit to the government rose from N22.99 trillion in May 2025, representing an increase of N17.39 trillion within 12 months.
The data also revealed that the government’s borrowing appetite remained strong on a month-on-month basis, with credit rising by N779.7 billion from N39.60 trillion recorded in April 2026.
The sharp increase reflects sustained demand for financing by fiscal authorities, who have increasingly turned to domestic debt instruments such as Treasury bills and Federal Government bonds to fund budgetary obligations and bridge fiscal deficits.
Industry data suggest that commercial and merchant banks continue to channel significant liquidity into government securities, attracted by their relatively low risk and attractive yields compared to lending to businesses and households.
In contrast, private sector credit recorded only modest growth during the review period. Lending to businesses and households increased to N81.04 trillion in May from N80.59 trillion in April, indicating cautious lending by financial institutions amid economic uncertainties and elevated borrowing costs.
Although private sector credit remains significantly larger in absolute terms—standing at roughly twice the level of public sector credit—the pace of growth highlights the increasing dominance of government borrowing within the banking system.
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Economic analysts warn that the trend could deepen concerns over the crowding-out effect, where excessive government borrowing reduces the availability of credit for productive sectors of the economy.
According to experts, continued preference by banks for government debt instruments may limit access to financing for manufacturers, small businesses and other private enterprises seeking capital for expansion.
They noted that while the banking sector remains liquid, sustained growth in public sector borrowing could constrain economic activity if private sector access to affordable credit continues to weaken.
The CBN did not provide a detailed breakdown of private sector credit by sector in the latest report.
However, analysts said the figures point to a banking industry increasingly adjusting its risk profile in favour of government obligations amid prevailing macroeconomic conditions.
The development comes as policymakers continue efforts to balance fiscal financing needs with the objective of stimulating private sector-led economic growth.
