Credit extended to the Nigerian government surged by N17.39 trillion in the year leading up to May 2026, reaching N40.38 trillion. This substantial increase highlights a continued growth in public-sector borrowing, even amidst the Central Bank of Nigeria's (CBN) relatively tight monetary policy.
Data released by the CBN indicates that government credit climbed from N22.99 trillion in May 2025 to N40.38 trillion in May 2026. This also marks an increase from N39.60 trillion recorded in April 2026.
Government Borrowing Sees Significant Uptick
The N17.39 trillion year-on-year increase in government credit represents a 75.6% rise between May 2025 and May 2026. Month-on-month, credit to government grew by N779.70 billion from April 2026, a 2.0% increase.
In contrast, credit to Nigeria’s private sector increased to N81.04 trillion in May 2026 from N80.59 trillion in April 2026, an increase of N456.21 billion or 0.57%. While private-sector credit remained more than twice the level of government credit, standing at about 2.01 times government credit in May 2026, its monthly growth rate was lower than that of government credit.
The sustained growth in banking-sector lending to the government reflects lenders' continued participation in financing public-sector borrowing requirements through loans, advances, and investments in government securities. The latest May data shows the year-on-year increase in government credit has widened further to N17.39 trillion, compared to a previously reported N15.66 trillion.
Private-sector credit increased by approximately N3.07 trillion from N77.97 trillion in May 2025 to N81.04 trillion in May 2026. The difference in growth rates underscores the stronger pace of expansion in lending to the public sector over this period.
Experts Warn of Crowding-Out Risks
Mallam Muftau Yusuf, a financial economist at Kwik Securities Ltd, expressed concerns that these figures reflect the attractiveness of government securities to banks in a high-interest-rate environment. He noted that financial institutions often prefer lending to the government due to lower risk and predictable returns compared to businesses operating in a challenging economic climate.
Yusuf stated, “When government borrowing rises significantly, there is always the concern that it could reduce the amount of credit available to the productive sectors of the economy. Banks naturally gravitate toward assets that offer high returns with minimal risk.” He added that while government borrowing is necessary for infrastructure and fiscal obligations, excessive dependence on domestic borrowing could constrain investment by manufacturers, small businesses, and other private-sector operators.
Similarly, Abuja-based economist Dr Ben Oladunjoye highlighted that high yields on government securities incentivize banks to increase their holdings of treasury instruments rather than extend long-term credit to businesses. “When yields on government securities remain attractive, banks have less incentive to take on the higher risks associated with private-sector lending. The result is that government borrowing can grow faster than credit to the real economy,” Oladunjoye explained.
CBN Maintains Tight Monetary Policy Stance
The CBN retained the Monetary Policy Rate (MPR) at 26.5% at its May 2026 Monetary Policy Committee meeting, maintaining its focus on inflation control and macroeconomic stability. This followed a reduction of the MPR by 50 basis points to 26.5% from 27% at its 304th meeting.
Higher interest rates can raise borrowing costs for businesses and households, potentially limiting demand for private-sector loans. Banks may also continue to favor government securities because of their relatively lower risk profile. The continued rise in credit to government will remain important for assessing the balance between public borrowing needs, banking-sector liquidity, and financing available to the private sector.
