CBN: FG Borrowing Jumps 76% to ₦40.4tn in One Year
Credit extended to the Federal Government surged by 75.6 percent over the past year, reaching ₦40.38 trillion in May 2026, according to the latest monetary and credit statistics released by the Central Bank of Nigeria, CBN.
The sharp increase underscores the government’s growing reliance on domestic borrowing to finance fiscal obligations despite a high-interest-rate environment and the CBN’s tight monetary stance aimed at curbing inflation.
Data from the apex bank show that total credit to the Federal Government rose from ₦22.99 trillion in May 2025 to ₦40.38 trillion in May 2026, representing an increase of approximately ₦17.4 trillion within the 12-month period.
The borrowing trend remained strong on a monthly basis, with government credit expanding by ₦779.7 billion in May alone, up from ₦39.60 trillion recorded in April 2026.
The surge comes at a time when monetary authorities continue to maintain restrictive policies to contain inflationary pressures and stabilize the economy. Analysts say the rapid growth in government borrowing could have implications for liquidity conditions, interest rates, and private sector access to credit.
The latest figures highlight the scale of public sector financing needs amid ongoing economic reforms and infrastructure spending commitments.
While government borrowing has helped fund critical expenditures, economists continue to monitor its potential impact on debt sustainability and the availability of credit to businesses and households.
The CBN data also reflect the dominant role of the public sector in domestic credit allocation, reinforcing concerns among market observers about the balance between government financing requirements and private sector growth.
With borrowing levels approaching ₦41 trillion, attention is likely to remain on the Federal Government’s fiscal strategy, revenue generation efforts, and plans to manage rising debt obligations in the coming months.
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 channelling 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 prioritise 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 recalibrating its risk dynamics to favour government obligations over the real economy.
[Source: Punch]
