Credit extended to the Nigerian government swelled by N17.39 trillion in May 2026, underscoring a deepening reliance on domestic bank financing even as the Central Bank of Nigeria maintains a relatively tight monetary policy posture.
Fresh data published by the CBN reveals that government credit climbed to N40.38 trillion in May 2026, up sharply from N22.99 trillion recorded in the same period a year earlier,, a year-on-year surge of 75.6% that financial analysts say reflects the irresistible pull of high-yielding government securities on Nigeria’s commercial banks.
On a month-on-month basis, the figures tell a similarly telling story. Government credit rose by N779.70 billion between April and May 2026 alone, a 2.0% increase from the N39.60 trillion posted the previous month, dwarfing the comparative growth recorded in lending to the private sector over the same period.
While credit to the private sector remains the larger pool in absolute terms, standing at N81.04 trillion in May 2026, roughly 2.01 times the level of government credit, its month-on-month growth tells a more sobering story.
Private-sector credit grew by just N456.21 billion, or 0.57%, from N80.59 trillion in April, a pace less than a third of the 2.0% monthly expansion recorded on the government side.
On a year-on-year basis, private-sector credit rose by approximately N3.07 trillion from N77.97 trillion in May 2025, a figure that, while not insignificant in isolation, pales against the N17.39 trillion jump in government credit over the same window.
The widening gap between the two lending trajectories is fast becoming a flashpoint for concern among Nigerian economists, who warn that the trend carries real consequences for the broader productive economy.
At the heart of this dynamic lies a straightforward calculus: in a high-interest-rate environment, government securities offer Nigerian banks a rare combination of attractive returns and virtually zero credit risk.
For institutions navigating a challenging macroeconomic landscape marked by currency volatility, inflationary pressure, and elevated loan default risk in some sectors, the appeal of treasury bills and government bonds is difficult to resist.
“Banks naturally gravitate toward assets that offer high returns with minimal risk,” said Mallam Muftau Yusuf, a financial economist at Kwik Securities Ltd, who noted that lenders’ growing appetite for public-sector instruments is a rational if economically costly response to prevailing market conditions. “When government borrowing rises significantly, there is always the concern that it could reduce the amount of credit available to the productive sectors of the economy.”
Yusuf was careful to acknowledge that some degree of government borrowing is unavoidable, particularly when the state must finance infrastructure projects and meet its fiscal obligations.
However, he cautioned that excessive dependence on domestic credit markets risks crowding out the manufacturers, small businesses, and entrepreneurs who are the engine of sustainable economic growth.
That caution was echoed by Dr. Ben Oladunjoye, an Abuja-based economist, who pointed to the structural incentive problem embedded in the current rate environment. “When yields on government securities remain attractive, banks have less incentive to take on the higher risks associated with private-sector lending,” he told this reporter. “The result is that government borrowing can grow faster than credit to the real economy.”
The phrase “crowding out,” a concept familiar to development economists but often lost in the noise of headline fiscal figures, describes precisely the risk that analysts like Yusuf and Oladunjoye are flagging.
When the government absorbs an outsized share of available banking-sector liquidity through securities issuance, the pool of loanable funds accessible to private businesses effectively shrinks or stagnates, constraining investment, hiring, and productivity growth at a time when the Nigerian economy can ill-afford such headwinds.
Nigeria’s fiscal position has remained stretched in recent years, with the federal government leaning heavily on domestic borrowing to bridge a persistent revenue gap even as it pursues subsidy reforms and broader fiscal consolidation.
The CBN’s tight monetary stance, reflected in benchmark rates that have remained elevated through much of 2025 and into 2026, was designed in part to tame inflation, but it has had the side effect of making government paper more attractive to risk-averse lenders.
As recently reported, government credit had already risen by N15.66 trillion over one year. The latest May 2026 data shows that the year-on-year increment has now widened further to N17.39 trillion,, a sign that the pace of public-sector borrowing, far from moderating, continues to accelerate.
One piece of the puzzle that remains outstanding is a granular, industry-level breakdown of how private-sector credit was distributed across different segments of the Nigerian economy in May 2026.
The CBN has yet to publish this sectoral decomposition, leaving analysts unable to determine whether what modest private-sector credit growth exists is being channelled toward high-impact industries such as manufacturing, agriculture, and small enterprise development or concentrated in sectors with less transformative economic potential.
That data, when it arrives, will be closely scrutinized by both policymakers and market participants eager to understand whether Nigeria’s credit architecture is working in the service of inclusive growth or whether it is quietly hollowing out the financing pipeline for the businesses that create jobs and drive output.
For now, the direction of travel is clear. Nigeria’s banks are deepening their exposure to the federal government at a pace that comfortably outstrips their appetite for private-sector risk.
The N40.38 trillion in government credit recorded in May 2026 represents not just a data point but a structural signal, one that speaks to the decisions being made by hundreds of loan officers and treasury desks across the country every single week.
Whether the CBN, the Federal Ministry of Finance, or the broader financial regulatory architecture will act to rebalance these incentives remains to be seen.
But with private businesses continuing to report difficulty accessing affordable credit, and with the gap between public and private lending growth showing no sign of narrowing, the pressure on policymakers to act is unlikely to ease anytime soon.
WHAT YOU SHOULD KNOW
Nigeria’s banks are increasingly choosing to lend to the government over the private sector, and the numbers make clear why: high-yielding, low-risk government securities are simply too attractive to pass up.
Credit to the government surged 75.6% year-on-year to N40.38 trillion in May 2026, while private-sector credit crept up by a comparatively modest 0.57% month-on-month.
The core concern is not the borrowing itself but what it displaces. As long as government securities offer superior returns with minimal risk, manufacturers, small businesses, and households will continue to lose out in the competition for bank credit.
Until the underlying incentive structure changes, Nigeria’s productive economy risks being slowly starved of the financing it needs to grow.
