Fresh data released by the Central Bank of Nigeria (CBN) reveals that credit to
the Federal Government rose sharply over the 12 months ending in May 2026.
The surge highlights an aggressive public sector appetite for borrowing despite
the prevailing tight monetary conditions in the country.
According to the CBN’s latest monetary and credit statistics on Wednesday,
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.
On a month-on-month basis, the government’s borrowing momentum showed
no signs of slowing down, expanding by N779.70bn in just 30 days from the
N39.60tn reported in April 2026.
Banking sector data indicate that commercial and merchant lenders are
continuing to allocate significant liquidity towards government securities.
Rather than channeling 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.
This steady rise in public sector credit reflects a strategic shift by fiscal
authorities to seek alternative funding sources through domestic debt issuance,
moving away from direct CBN financing.
In stark contrast to the government’s aggressive borrowing, credit to the private
sector grew modestly in May 2026. Lending to businesses and households
ticked up to N81.04tn, compared to N80.59tn in April, reflecting a highly
cautious approach by lenders and a slower expansion of credit to the real
economy. Despite this sluggish monthly growth, private sector credit remains
dominant in absolute terms, sitting at roughly 2.01 times the level of public
sector credit for May.
Economic analysts and financial experts suggest that the data clearly
underscores a persistent tilt towards public sector borrowing, driven by the
government’s need to fund its fiscal deficit. While the banking system remains
liquid, economists caution that if financial institutions continue to prioritize
high-yield government debt, it could permanently “crowd out” productive
private industries. Without access to affordable credit, local businesses and
manufacturers may struggle to expand, potentially slowing overall economic
growth.
The apex bank has not released a detailed sectoral breakdown of private credit
allocation for the period under review.
However, the overarching trend points towards a banking sector heavily
re-calibrating its risk dynamics to favour government obligations over the real
economy.