Credit extended by Nigerian banks to the federal and state governments surged by N17.39 trillion in the year to May 2026, according to the latest monetary statistics from the Central Bank of Nigeria.
The figure represents a 75.6% increase, with government credit climbing to N40.38 trillion in May 2026 from N22.99 trillion in the same month of 2025. On a month-on-month basis, credit to government rose by N779.70 billion, or 2.0%, from N39.60 trillion recorded in April 2026.
In contrast, credit to the private sector grew at a slower pace. Private-sector loans and advances stood at N81.04 trillion in May 2026, up from N80.59 trillion in April — an increase of N456.21 billion or 0.57%. While private-sector credit remains more than double the level of government credit at a ratio of about 2.01 to 1, the pace of expansion in public-sector lending has accelerated relative to business and household lending.
The CBN retained the Monetary Policy Rate at 26.5% at its May 2026 meeting, after a 50-basis-point cut from 27% at its previous session. The high interest rate environment has made government securities more attractive to banks, given their lower risk profile and predictable returns compared to private-sector lending.
Financial economist Mallam Muftau Yusuf of Kwik Securities Ltd said the data reflects banks' preference for government instruments in a high-yield environment. "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. Banks naturally gravitate toward assets that offer high returns with minimal risk," he said.
Another economist, Dr Ben Oladunjoye, warned that attractive yields on government securities reduce banks' incentive to extend long-term credit to businesses. "The result is that government borrowing can grow faster than credit to the real economy," he explained.
The persistent rise in government credit from the banking sector underscores the growing reliance on domestic borrowing to meet fiscal obligations. Analysts say this could constrain investment by manufacturers, small businesses, and other private-sector operators if the trend continues. The CBN has yet to release a sectoral breakdown of private-sector credit allocation for May 2026.
