Nigeria’s Federal Government domestic borrowings surged by N9.19 trillion in 2025, significantly reducing the pool of credit available to the private sector and tightening financing conditions for businesses, according to Central Bank of Nigeria (CBN) money and credit statistics.
The rising demand for local funds by the government occurred amid high interest rates and limited liquidity in financial markets.
An analysis of the CBN money and credit data shows that credit to the Federal Government increased from N25.03tn in January 2025 to N34.22tn by December, representing a N9.19tn expansion within the year.
Over the same period, net credit to the private sector declined by N1.543tn, underscoring a growing imbalance in resource allocation between public and private borrowers.
Credit to the government consists mainly of funds extended by banks through purchases of Treasury bills, bonds and other debt instruments, as well as direct lending by financial institutions to federal coffers to finance budget deficits, refinance maturing obligations and support recurrent expenditures.
In contrast, private sector credit primarily fuels working capital, expansion, investment and trade activities, serving as a key indicator of economic performance.
Economists and industry stakeholders said the surge in government borrowing is crowding out private sector access to credit, particularly for manufacturers and small and medium enterprises (MSMEs) that depend on bank loans to finance operations.
The Manufacturers Association of Nigeria (MAN) said lenders have preferred government securities over private loans because government instruments are perceived as lower risk and offer attractive yields in the prevailing high-interest-rate environment.
Segun Kadir Ajayi, Director-General of MAN, said the data clearly indicates that the financial system’s resources are increasingly directed toward government borrowing, leaving insufficient credit for productive sectors of the economy.
He noted that many firms have scaled back borrowing for expansion and raw material sourcing amid high costs and weak demand conditions.
Renowned economist Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, warned that the trend further disadvantages the private sector, which faces higher borrowing costs and tough lending conditions compared with government access to funds through bond issuance.
He said banks prefer government securities because they carry minimal default risk and offer assured returns.
Analysts said the private sector’s shrinking credit share could have broader implications for investment, job creation and economic growth, especially as businesses struggle to secure financing for capital projects and working capital needs amid tight monetary policy.
They argue that reducing government reliance on domestic financing, lowering interest rates and boosting revenue mobilisation could help rebalance credit allocation and stimulate private investment.
The sharp rise in government credit comes as Nigeria continues to navigate fiscal pressures, including revenue shortfalls, debt servicing obligations and elevated interest rates aimed at controlling inflation, all of which contribute to the broader economic challenges facing private businesses.
