Credit to Nigerian government – The Trumpet Newspaper Nigeria

Credit to Nigerian government increased by N17.39 trillion between May 2025 and May 2026, highlighting sustained growth in public-sector borrowing despite the Central Bank of Nigeria’s (CBN) monetary tightening measures aimed at controlling inflation and stabilising the economy.

Key Highlights:

• Credit to Nigerian government rose from N22.99 trillion in May 2025 to N40.38 trillion in May 2026.
• Government borrowing increased by N17.39 trillion year-on-year, representing a 75.6% rise.
• Monthly government credit grew by N779.7 billion between April and May 2026.
• Private-sector credit rose modestly to N81.04 trillion in May 2026.
• Economists warn of potential crowding-out effects on businesses and manufacturers.
• Banks continue to favour government securities due to lower risk and attractive returns.

According to data released by the Central Bank of Nigeria, government credit climbed to N40.38 trillion in May 2026, compared to N22.99 trillion recorded in the corresponding period of 2025. The figure also represents an increase from N39.60 trillion posted in April 2026.

The latest statistics indicate that banks have continued to increase their exposure to public-sector lending through loans, advances, and investments in government securities, even as credit growth to businesses and households remains comparatively slower.

Government Borrowing Records Strong Growth

A breakdown of the CBN monetary statistics shows that the N17.39 trillion increase in Credit to Nigerian government translates to a 75.6 per cent year-on-year growth.

On a month-to-month basis, government credit expanded by N779.70 billion, rising from N39.60 trillion in April 2026 to N40.38 trillion in May 2026, representing a 2.0 per cent increase.

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Meanwhile, credit to Nigeria’s private sector increased to N81.04 trillion in May 2026 from N80.59 trillion in April, reflecting a monthly growth of N456.21 billion or 0.57 per cent.

Although private-sector credit remains more than twice the size of government credit, its growth rate continues to lag behind the pace of public-sector borrowing.

Concerns Over Impact on Private Sector

Economic analysts have expressed concerns that the rapid expansion in Credit to Nigerian government could reduce access to financing for businesses, particularly manufacturers, small and medium-sized enterprises (SMEs), and other productive sectors of the economy.

Financial economist at Kwik Securities Ltd, Mallam Muftau Yusuf, noted that government securities remain highly attractive to financial institutions because they offer lower risks and predictable returns.

“When government borrowing rises significantly, there is always concern that it could reduce the amount of credit available to productive sectors of the economy. Banks naturally gravitate toward assets that offer strong returns with minimal risk,” Yusuf said.

He warned that excessive reliance on domestic borrowing could constrain private investment and slow economic growth despite government efforts to finance infrastructure and development projects.

Similarly, Abuja-based economist Dr. Ben Oladunjoye said attractive yields on government securities often encourage banks to prioritise treasury instruments over long-term lending to businesses.

“When government securities offer competitive returns, banks have less incentive to take on the risks associated with private-sector lending. This often results in government credit growing faster than financing for the real economy,” he explained.

CBN Maintains Tight Monetary Policy

The development comes as the Central Bank of Nigeria continues to pursue a tight monetary policy stance aimed at curbing inflation and maintaining macroeconomic stability.

At its 304th Monetary Policy Committee (MPC) meeting, the apex bank reduced the Monetary Policy Rate (MPR) by 50 basis points from 27 per cent to 26.5 per cent before retaining the rate at its May 2026 meeting.

Higher interest rates typically increase borrowing costs for businesses and consumers, potentially limiting demand for private-sector loans while encouraging banks to invest more heavily in government-backed securities.