CBN reports N17.4tn surge in FG borrowing

Nigeria's Federal Government aggressively ramped up its borrowing over the 12 months leading up to May 2026, accumulating an additional N17.4 trillion in credit. Data from the Central Bank of Nigeria (CBN) shows total credit to the government surged to N40.38 trillion, a substantial 75.6% increase from N22.99 trillion in the same period the previous year. This aggressive appetite for borrowing highlights a strategic shift by fiscal authorities to domestic debt issuance, moving away from direct CBN financing.

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total credit to the government climbed to N40.38tn in May 2026, up from N22.99tn recorded in the corresponding period of 2025. This marks a year-on-year increase of N17.39tn (approximately N17.4tn), representing a massive 75.6 per cent rise in lending exposure to the public sector.

The government's borrowing momentum continued on a monthly basis, expanding by N779.70 billion in May alone. This trend indicates a strong preference among financial institutions, including commercial and merchant lenders, to allocate significant liquidity towards low-risk government securities like Federal Government bonds and treasury bills. These instruments are favored for financing ongoing fiscal operations.

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Rather than channelling funds into the wider economy, financial institutions have heavily favoured low-risk instruments like Federal Government bonds and treasury bills to help finance ongoing fiscal operations.

In stark contrast, credit to the private sector experienced only modest growth. Lending to businesses and households increased to N81.04 trillion in May 2026, a slight rise from N80.59 trillion in April. This reflects a cautious approach by lenders and a slower expansion of credit to the real economy, although private sector credit still significantly outweighs public sector credit in absolute terms.

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the data clearly underscores a persistent tilt towards public sector borrowing, driven by the government’s need to fund its fiscal deficit.

Economic analysts express concern that this persistent tilt towards public sector borrowing, driven by the government's need to fund its fiscal deficit, could have negative consequences. They caution that if financial institutions continue to prioritize high-yield government debt, it may "crowd out" productive private industries. Without access to affordable credit, local businesses and manufacturers could struggle to expand, potentially hindering overall economic growth.

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if financial institutions continue to prioritise high-yield government debt, it could permanently “crowd out” productive private industries.