Fresh Central Bank of Nigeria data shows a sharp rise in credit to the government.
Banking-sector credit to government rose to ₦40.38 trillion in May 2026. In May 2025, it stood at ₦22.99 trillion.
That means credit to the government increased by ₦17.39 trillion in one year. This represents a 75.6% jump.
The figure also rose by ₦779.7 billion between April and May 2026.
Private-sector credit grew much slower. It rose from ₦77.97 trillion in May 2025 to ₦81.04 trillion in May 2026. That is a 3.9% increase.
The numbers show a clear shift. Banks and the financial system are giving more room to government credit, while businesses and households are seeing slower credit growth.
This matters because credit affects inflation, interest rates, business expansion and the naira. Private-sector. This matters because credit affects inflation, interest rates, business expansion and the naira.
CBN DATA
The correct way to describe this data is ‘credit to the government’, not total Federal Government borrowing.
That distinction matters.
The CBN data tracks banking-sector credit to the government. It does not capture every form of government borrowing from all sources.
So, the story is not simply that all Federal Government borrowing jumped by 75.6%. The more accurate point is that banking-sector credit to the government jumped by 75.6%.
This still raises serious concerns.
It shows that the government now takes a larger share of domestic credit. It also shows that private-sector credit is growing at a much slower pace.
Key Numbers at a Glance
| Indicator | May 2025 | May 2026 | Change |
|---|---|---|---|
| Credit to government | ₦22.99 trillion | ₦40.38 trillion | Up 75.6% |
| Credit to private sector | ₦77.97 trillion | ₦81.04 trillion | Up 3.9% |
| Increase in government credit | Not applicable | ₦17.39 trillion | Sharp yearly rise |
| Month-on-month rise in government credit | April to May 2026 | ₦779.7 billion | Continued increase |
| Monetary Policy Rate | 26.50% | 26.50% | Still elevated |
Why Government Credit Is Rising
The government needs money to fund its budget, pay debt, support projects and meet other obligations.
When revenue falls short, the government turns to borrowing.
Banks often prefer government securities because they carry lower risk. Treasury Bills and bonds also offer attractive yields.
This makes government paper appealing to banks and investors.
But this creates a problem for the wider economy.
When banks put more money into government instruments, they have less pressure to lend to businesses. This can reduce credit available to manufacturers, farmers, traders and small business owners.
What It Means for Inflation
Heavy government borrowing can add pressure to inflation.
When the government borrows and spends, more money enters the economy. Contractors, workers and suppliers receive payments. Demand rises.
Prices can rise when supply fails to grow at the same speed.
This is the main inflation risk.
Nigeria already faces pressure from food, energy, transport and import costs. More spending can keep prices high if production remains weak.
For households, this means the cost of living may stay painful.
Food, rent, fuel and transport may remain expensive.
The problem becomes worse when businesses cannot get affordable loans. Farmers need credit to expand. Manufacturers need credit to produce more. Small businesses need working capital to survive.
If credit does not flow to these sectors, supply stays weak. When supply stays weak, prices remain under pressure.
What It Means for Interest Rates
Government borrowing can keep interest rates high.
Banks and investors demand strong returns before they lend large sums to the government. This pushes yields on Treasury Bills and bonds higher.
Once government securities offer high returns, private borrowers face a tougher market.
Businesses must pay more to borrow. Individuals also face higher costs on personal loans, car loans and mortgages.
The CBN’s Monetary Policy Rate stands at 26.50%. That keeps borrowing costs high across the economy.
The CBN wants to control inflation. But rising government credit makes that job harder.
If government borrowing stays high, interest rates may remain elevated for longer.
What It Means for Businesses
Businesses may suffer the most.
A manufacturer may delay expansion because loans are too expensive. A farmer may postpone planting because credit costs too much. A shop owner may avoid borrowing because repayment looks risky.
This slows growth.
It also affects jobs. Businesses hire fewer workers when they cannot expand.
Economists call this crowding out.
Crowding out happens when government borrowing takes funds that could have gone to private businesses.
Nigeria needs the private sector to grow. Businesses create jobs, produce goods, pay taxes and support innovation.
When banks prefer government securities, the real economy loses momentum.
What It Means for the Naira
The effect on the naira can go in two directions.
Domestic borrowing can reduce the need for fresh foreign loans. That may lower immediate pressure on external debt.
But heavy borrowing can also hurt the naira if it fuels inflation.
Inflation weakens purchasing power. When people lose confidence in the naira, they often seek dollars as a safer store of value.
Businesses may also increase dollar demand to protect themselves from rising costs.
This can put pressure on the exchange rate.
So the issue is not only the size of the credit to the government. The bigger question is how the government uses the money.
If the money supports productive projects, the economy can benefit.
If it only funds short-term spending, Nigeria may face more inflation, higher rates and fresh pressure on the naira.
Why Private-Sector Credit Matters
Private-sector credit remains larger than credit to the government. But its growth is slow.
That is a warning sign.
Nigeria needs more credit for agriculture, manufacturing, technology, exports and small businesses.
These sectors produce goods. They also create jobs and generate tax revenue.
When credit flows mainly to government securities, the economy may look active on paper. But businesses still struggle to access capital.
A strong economy needs banks to fund production, not only government deficits.
Expert View
The concern is not that the government borrowed. Governments borrow across the world.
The real issue is the speed, size and purpose of the borrowing.
If Nigeria uses the funds to build roads, power projects, ports and other productive assets, the economy may gain long-term value.
But if the money goes mainly into debt servicing and recurrent spending, the country gains little.
Nigeria needs a clear borrowing strategy.
The government should link new borrowing to projects that can grow the economy. It should also improve revenue collection and cut waste.
For the CBN, the challenge is tough. It must fight inflation without choking private-sector credit.
For banks, the key question is simple. Will they keep chasing safe government yields, or will they lend more to businesses that create jobs?
What Government Should Do Next
Nigeria needs stronger fiscal discipline.
The government should publish clear borrowing plans. It should explain how much it wants to borrow, why it needs the money and how it will repay.
It should also direct borrowing toward productive projects.
Every major borrowing plan should answer one question: how will this grow the economy?
The government must also improve tax collection, raise oil revenue and reduce wasteful spending.
Banks need stronger incentives to lend to productive sectors. Agriculture, manufacturing and SMEs need affordable credit to grow.
The Big Picture
The 75.6% jump in banking-sector credit to the government shows a deeper economic challenge.
Nigeria still spends more than it earns. Banks still find government securities attractive. Businesses still face costly credit.
This keeps pressure on inflation, interest rates and the naira.
Nigeria can borrow when necessary. But it must borrow wisely.
The country needs debt that supports growth, not debt that crowds out businesses and weakens household income.
FAQ
Did total Federal Government borrowing jump by 75.6%?
The more accurate statement is that banking-sector credit to the government rose by 75.6%. This is the CBN data category. It does not represent every form of government borrowing.
How much credit did the government receive?
Credit to government rose to ₦40.38 trillion in May 2026, up from ₦22.99 trillion in May 2025.
How much did private-sector credit rise to?
Private-sector credit rose to ₦81.04 trillion in May 2026, up from ₦77.97 trillion in May 2025.
Why does this matter?
It matters because rising government credit can affect inflation, interest rates, business lending and the naira.
How can it affect inflation?
Government borrowing can increase spending in the economy. If production does not rise, prices may remain high.
How can it affect interest rates?
High government borrowing can push up yields on Treasury Bills and bonds. This can keep borrowing costs high for businesses and households.
How can it affect the naira?
If borrowing fuels inflation, confidence in the naira may weaken. People and businesses may demand more dollars, which can pressure the exchange rate.
Is government borrowing always bad?
No. Borrowing can help when it funds productive projects. It becomes risky when it funds short-term spending without growing revenue.
What should Nigeria do now?
Nigeria should reduce waste, grow revenue, borrow for productive projects and support more lending to businesses.