The Federal Government’s domestic borrowings surged by N9.19 trillion in 2025, crowding out credit to the private sector and restricting financial support for Nigerian businesses, analysts and industry sources said. The data were obtained from the Central Bank of Nigeria (CBN) on Thursday.
According to an analysis of monetary and credit statistics, government credit to the domestic financial system rose sharply, while net credit to the private sector contracted by N1.543 trillion over the same period. The divergence highlights a growing imbalance in credit allocation between the public and private sectors.
CBN statistics showed that total credit to the Federal Government increased from N25.03 trillion in January 2025 to N34.22 trillion in December, representing a N9.19 trillion rise within the year. This increase was significantly higher than the N3.62 trillion expansion in government credit recorded in 2024.
Government borrowing from the domestic financial system primarily involves the purchase of Treasury bills, bonds and other securities by banks and financial institutions. These funds are used to finance budget deficits; refinance maturing obligations and support recurrent expenditure when revenue falls short of spending needs.
In contrast, net credit to the private sector declined over the year, falling from N77.38 trillion in January 2025 to N75.83 trillion in December, a cumulative contraction of N1.543 trillion.
Private sector credit represents loans and advances granted to businesses, households and non-government entities for working capital, expansion and investment.
Industry analysts described the trend as a crowding-out effect, where rising government demand for domestic funds reduces the pool of capital available for private sector lending.
Elevated interest rates in the financial system have further discouraged banks from extending credit to businesses, which face higher borrowing costs relative to government securities.
Mr Segun Kadir Ajayi, Director-General of the Manufacturers Association of Nigeria (MAN), said the pattern reflects commercial banks’ preference to lend to government, which offers lower risk and higher yields compared with private sector borrowing.
He noted that many firms have scaled back borrowing for expansion and raw material sourcing amid escalating costs and limited liquidity.
“Government demand for credit is crowding out private sector borrowing,” Ajayi said, adding that high interest rates make it difficult for businesses to secure affordable finance for growth.
Economists also warned that persistent imbalance between public and private sector credit could dampen investment, limit job creation and slow economic growth. They urged policy interventions to stimulate lending to productive sectors, including targeted financing and reduced interest rates.
The surge in government borrowing arises amid ongoing fiscal pressures, including rising debt servicing costs, revenue shortfalls and increased spending obligations following reforms such as fuel subsidy removal and exchange rate adjustments.
CBN’s tight monetary stance, anchored by elevated interest rates, has raised the cost of borrowing across the economy, further affecting private sector access to credit.
The Federal Government’s significant rise in domestic borrowing in 2025 has limited credit availability for Nigerian businesses, as private sector credit contracted alongside government credit expansion.
Analysts say this trend underscores the need for policy measures to rebalance credit allocation and support private sector growth.
