Nigeria’s credit exposure to the Federal Government surged by 75.6 per cent year-on-year to N40.38 trillion in May 2026, highlighting a sustained appetite for public sector borrowing despite the country’s tight monetary environment.
Latest monetary and credit statistics released by the Central Bank of Nigeria (CBN) on Wednesday showed that total credit to the government rose from N22.99 trillion recorded in May 2025 to N40.38 trillion in May 2026. The increase represents an additional N17.39 trillion in lending to the public sector within one year.
The data also revealed that government borrowing maintained strong momentum on a monthly basis. Credit to the Federal Government increased by N779.70 billion from N39.60 trillion recorded in April 2026, reaching N40.38 trillion in May.
Banking sector figures indicate that commercial and merchant banks continue to channel significant liquidity into government securities. Financial institutions have increasingly favoured relatively low-risk investments such as Federal Government bonds and treasury bills rather than extending credit to the broader economy.
Analysts say the trend reflects the government’s growing reliance on domestic debt issuance to finance fiscal operations, marking a shift away from direct financing from the apex bank.
Meanwhile, credit to the private sector recorded only marginal growth during the period under review. Lending to businesses and households increased to N81.04 trillion in May 2026 from N80.59 trillion in April, signalling a cautious lending approach by financial institutions and a slower expansion of credit to productive sectors of the economy.
Despite the modest growth, private sector credit remained significantly higher than public sector borrowing, standing at approximately twice the level of government credit in May.
Economic experts have warned that the continued rise in public sector borrowing could lead to a crowding-out effect, where banks prioritise high-yield government debt over lending to businesses and manufacturers.
They noted that while the banking system remains liquid, sustained preference for government securities may limit access to affordable financing for private enterprises, potentially slowing investment, business expansion and overall economic growth.
The CBN has yet to provide a detailed sectoral breakdown of private sector credit allocation for the period.
However, the latest figures suggest that Nigeria’s banking sector is increasingly adjusting its risk profile in favour of government obligations, raising concerns about the long-term impact on private sector growth and economic development.
