Banks’ Lending to Nigerian Government Increases by N15.66tn in One Year
Government borrowing dominates domestic credit growth as private sector lending lags behind
Nigerian banks significantly ramped up lending to the federal government over the past year, with credit to the public sector jumping by N15.66 trillion, raising fresh concerns about the shrinking space available for private sector financing in Africa’s largest economy.
According to data from the Central Bank of Nigeria (CBN), credit extended to the Nigerian government rose sharply from N23.93 trillion in April 2025 to N39.60 trillion in April 2026, representing a year-on-year increase of 65.44 percent. The surge placed government borrowing as the dominant driver of overall domestic credit growth during the period.
Net domestic credit climbed from N102.00 trillion to N120.18 trillion within the same timeframe, reflecting a total expansion of N18.18 trillion or 17.83 percent. However, analysts note that the bulk of this growth was driven by public sector demand rather than productive private sector activity.
In stark contrast, credit to the private sector, which covers loans and financing provided to businesses and individuals for investment, production, and consumption, grew by a modest N2.52 trillion, edging from N78.07 trillion to N80.59 trillion over the review period. This sluggish growth rate raises concerns among economists who warn that constrained access to credit could dampen business expansion, slow investment, and weigh on overall economic productivity.
The data points to a growing trend of financial intermediation being tilted toward government securities and public sector financing instruments, as banks increasingly find sovereign lending a lower-risk alternative amid economic uncertainties.
Critics argue that the widening gap between government and private sector credit access reflects a form of crowding out, where aggressive government borrowing absorbs a disproportionate share of available funds in the banking system, leaving businesses with fewer and costlier borrowing options.
The CBN, as Nigeria’s apex monetary authority, is responsible for overseeing monetary policy and ensuring financial stability. Observers are now watching closely to see whether the bank will take steps to rebalance credit flows and stimulate greater lending to the productive private sector, which remains central to driving sustainable economic growth.
As Nigeria navigates persistent inflationary pressures and a challenging macroeconomic environment, the question of whether banks will redirect capital away from government borrowing toward private enterprise remains one of the most critical issues facing the country’s financial system.
