Credit extended to the Federal Government by the banking system rose to N40.38 trillion in May 2026, reflecting a sharp increase in public sector borrowing amid ongoing efforts to finance budgetary obligations and infrastructure spending.
Latest monetary and credit statistics released by the Central Bank of Nigeria (CBN) showed that government credit grew by N17.39 trillion within one year, rising from N22.99 trillion recorded in May 2025. The increase represents a 75.6 per cent jump in lending to the public sector.
The data also revealed that the upward trend persisted on a month-to-month basis, with government borrowing increasing by N779.7 billion from N39.60 trillion in April to N40.38 trillion in May.
The figures point to a sustained appetite for domestic borrowing despite elevated interest rates and the apex bank's tight monetary policy stance aimed at curbing inflation.
Industry analysts say the growth in public sector credit reflects increased issuance of government debt instruments, which continue to attract strong demand from banks because of their relatively low risk and attractive returns.
As financial institutions channel more funds into Treasury Bills and Federal Government bonds, concerns have emerged over the implications for private sector financing.
CBN data showed that credit to the private sector rose only marginally during the period under review. Loans to businesses and households increased from N80.59 trillion in April to N81.04 trillion in May, a modest growth compared to the pace of government borrowing.
Although private sector credit remained higher at N81.04 trillion, more than double the level recorded for government borrowing, economists warned that the widening public sector demand for funds could place pressure on credit availability for productive sectors of the economy.
They noted that while domestic borrowing provides a viable source of funding for government operations, excessive dependence on the banking sector could discourage lending to manufacturers, agribusinesses and other enterprises that rely on credit for expansion.
The development comes as fiscal authorities continue to explore domestic debt markets as a key funding source, following efforts to reduce reliance on direct financing from the Central Bank.
While the banking system remains liquid, experts argue that sustaining a balance between government financing needs and private sector access to credit will be critical to supporting long-term economic growth.
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