Banks Increase Lending to Government by ₦15.66 Trillion in One Year, CBN Data Shows

Banks Increase Public Sector Lending While Private Sector Credit Slows

Nigerian banks increased their lending to the Federal Government by ₦15.66 trillion over a 12-month period, highlighting a significant shift in credit allocation within the financial system. According to the latest money and credit statistics released by the Central Bank of Nigeria (CBN), credit to government rose from ₦23.93 trillion in April 2025 to ₦39.60 trillion in April 2026, representing a year-on-year increase of 65.44%.

The figures indicate that government borrowing accounted for the vast majority of domestic credit expansion during the period, while lending to the private sector recorded comparatively modest growth. The trend raises important questions about credit availability for businesses, investment activity and the broader implications for economic growth.

/ You Might Also Like /

Government Borrowing Drives Domestic Credit Expansion

CBN data show that net domestic credit increased from ₦102 trillion in April 2025 to ₦120.18 trillion in April 2026, an increase of ₦18.18 trillion or 17.83%. Of that total increase, government borrowing accounted for ₦15.66 trillion, representing approximately 86% of the annual growth in domestic credit.

During the same period, credit to the private sector increased by only ₦2.52 trillion, rising from ₦78.07 trillion to ₦80.59 trillion. The disparity suggests that banks increasingly directed available credit toward government-related instruments and obligations rather than business and consumer lending.

Analysts often view the balance between public and private sector borrowing as an important indicator of economic activity and investment conditions.

Government's Share of Credit Continues to Rise

The latest figures show a notable increase in the government's share of total domestic credit.

According to the CBN, government credit represented 23.46% of net domestic credit in April 2025. By April 2026, that figure had increased to 32.95%, reflecting the growing role of public sector borrowing within Nigeria’s banking system.

Compared with December 2025, credit to government increased by ₦5.38 trillion within the first four months of 2026, rising from ₦34.22 trillion to ₦39.60 trillion. This represents a 15.71% increase over the period.

The trend suggests that banks continue to find government-related lending attractive, particularly amid changing monetary conditions and evolving risk assessments within the financial sector.

Private Sector Credit Remains Under Pressure

While government borrowing expanded significantly, lending to businesses and households showed weaker momentum.

CBN data indicate that private sector credit declined sharply from ₦94.61 trillion in February 2026 to ₦80.59 trillion in April 2026, representing a decrease of ₦14.02 trillion or 14.82%.

Earlier data also showed that private sector credit fell to ₦75.24 trillion in January 2026 from ₦75.83 trillion in December 2025, highlighting persistent volatility in lending conditions.

Financial analysts note that elevated interest rates, regulatory requirements and broader economic uncertainties have contributed to cautious lending behaviour among financial institutions.

Monetary Policy and Liquidity Conditions Influence Lending Trends

The credit allocation pattern comes against the backdrop of evolving monetary policy measures implemented by the Central Bank of Nigeria.

The CBN reduced the Monetary Policy Rate (MPR) by 50 basis points to 26.5% earlier in 2026 as part of efforts to balance inflation control with economic growth objectives. Despite the rate adjustment, liquidity management measures remained aggressive, with the apex bank continuing to withdraw excess liquidity through Open Market Operations (OMO) and other interventions.

In May 2026 alone, the CBN withdrew a net ₦1.57 trillion from the financial system through liquidity management operations aimed at controlling inflationary pressures.

These monetary conditions have influenced how banks allocate capital between government securities and private sector lending opportunities.

Implications for Economic Growth and Investment

Economists generally regard private sector credit as a critical driver of economic growth because it supports business expansion, job creation and productive investment.

When a larger share of available credit flows to government borrowing, concerns often emerge regarding the potential crowding-out effect on businesses, particularly small and medium-sized enterprises that depend heavily on bank financing.

Industry experts note that government securities frequently offer lower risk profiles compared with commercial lending, making them attractive to banks operating in uncertain economic environments. However, sustained imbalances between public and private sector lending may affect investment activity and economic productivity over the long term.

The latest figures therefore highlight the importance of maintaining a healthy balance between fiscal financing needs and private sector access to capital.

Fiscal Pressures Continue to Shape Borrowing Patterns

The increase in government borrowing reflects ongoing efforts to finance budgetary obligations, infrastructure projects and development programmes amid evolving fiscal conditions.

Nigeria continues to face significant expenditure requirements across transportation, housing, energy, education and security sectors. At the same time, authorities have sought to improve revenue generation through economic reforms and tax administration measures.

Public sector borrowing remains an important financing mechanism, particularly as governments seek to support infrastructure development and economic growth initiatives.

However, fiscal experts argue that sustainable public finance management requires balancing borrowing with revenue growth and efficient expenditure allocation.

What the Data Means for Investors

For investors and financial market participants, the latest CBN figures provide insight into credit allocation trends and broader economic conditions.

The increasing share of government borrowing within the banking system may support demand for sovereign debt instruments and government-backed securities. At the same time, weaker private sector credit growth could signal slower investment expansion in certain segments of the economy.

Market observers will continue monitoring future CBN data to determine whether recent monetary policy adjustments lead to stronger private sector lending and more balanced credit growth across the economy.

Conclusion

CBN data show that Nigerian banks increased lending to government by ₦15.66 trillion between April 2025 and April 2026, accounting for approximately 86% of total domestic credit growth during the period. The figures highlight the growing role of public sector borrowing within the banking system, even as private sector lending remains relatively subdued.

As policymakers seek to balance fiscal financing requirements with economic growth objectives, the allocation of credit between government and private sector borrowers will remain a key indicator for investors, businesses and financial institutions. Future trends in lending activity will likely play an important role in shaping Nigeria’s broader economic and investment outlook.

READ MORE