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•N17.39trn borrowed in 1 year
The federal government’s domestic borrowing rose sharply by 75.6 per cent over the past year, climbing to N40.38 trillion in May 2026 from N22.99 trillion recorded in the same period last year.
This is according to the latest monetary and credit statistics released by the Central Bank of Nigeria (CBN).
The figures show that the government borrowed an additional N17.39 trillion within one year, which highlighted its growing reliance on the domestic debt market to finance public spending amid a tight monetary environment.
The report also showed that government borrowing continued to increase on a monthly basis. Credit to the public sector rose from N39.60 trillion in April 2026 to N40.38 trillion in May, representing an increase of N779.7 billion in just one month.
The latest data point to an aggressive borrowing strategy by the federal government at a time when banks remain cautious about extending loans to businesses and households.
Financial analysts say the trend reflects the government’s increasing dependence on local borrowing through Treasury Bills and federal government bonds, which are regarded by banks and other investors as safe and profitable investment options.
The development comes despite the Central Bank’s efforts to maintain tight monetary policies aimed at slowing inflation and stabilising the economy.
According to the CBN report, total net domestic credit rose to N121.42 trillion in May, suggesting that more funds are circulating within the economy.
Economists warn that sustained government borrowing could put pressure on inflation if public spending rises faster than the supply of goods and services.
They explained that when the government borrows heavily from banks, the funds are used to finance salaries, infrastructure projects, debt servicing and other public expenditures.
If production fails to increase at the same pace, the additional money in circulation may lead to higher prices of food, transport and other essential goods.
Although inflation has shown signs of easing in recent months, experts say persistent domestic borrowing could slow efforts to bring down the cost of living.
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The figures also indicate that banks continue to channel a significant share of their resources toward financing government obligations instead of expanding lending to businesses.
Private sector credit increased only slightly during the review period. Lending to businesses and households rose from N80.59 trillion in April to N81.04 trillion in May, an increase of just N450 billion.
While total lending to the private sector remains significantly higher than government borrowing, the pace of growth has remained relatively slow.
Analysts say this cautious lending pattern reflects concerns over economic uncertainty, high borrowing costs and the risks associated with lending to businesses.
Many banks prefer government securities because they offer predictable returns with minimal risk compared to commercial loans that may become difficult to recover.
Economic experts have also expressed concern over what is known as the “crowding out” effect, where heavy government borrowing reduces the amount of money available for businesses to access.
According to them, when financial institutions commit more funds to government securities, manufacturers, farmers, small businesses and other productive sectors may struggle to obtain affordable loans needed for expansion.
Limited access to credit could slow investment, reduce job creation and weaken overall economic growth.
Higher government borrowing could also contribute to keeping interest rates elevated, as banks continue to earn attractive returns from government debt instruments rather than competing aggressively to lend to private businesses.
Businesses have repeatedly complained that the current high interest rate environment has increased the cost of borrowing, making it more difficult to expand operations and create employment.
The CBN did not provide a sector-by-sector breakdown of private sector lending in its latest report.
However, the latest figures accentuate a continuing shift in banking sector lending patterns, with financial institutions maintaining a strong appetite for financing government activities.
As the federal government continues to rely heavily on domestic borrowing to fund its fiscal operations, economists say maintaining a balance between financing public expenditure and ensuring adequate credit flows to the private sector will remain crucial to supporting economic growth, reducing inflationary pressures and improving living standards for Nigerians.
