Nigeria government borrowing jumped sharply in 2025 as CBN data show public sector credit rising while private sector lending contracted

The Federal Government of Nigeria sharply increased domestic borrowing from financial market operators in 2025, deepening a credit imbalance with the private sector despite elevated interest rates, according to data released by the Central Bank of Nigeria on Thursday.

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CBN money and credit statistics showed that credit to the Federal Government rose by N9.19tn during the year, while net credit to the private sector declined by N1.54tn, creating a widening gap of N9.19tn between public and private sector access to funding.

The surge in Nigeria government borrowing reflected heightened fiscal pressures and growing reliance on domestic sources to finance budget deficits, refinance maturing obligations, and manage cash flow shortfalls amid weak revenue growth.

By contrast, the contraction in private sector credit highlighted the strain on businesses facing tight liquidity, high borrowing costs, and subdued economic conditions, with many firms opting to reduce existing debts rather than pursue new loans.

According to the data, credit to the public sector climbed from N25.03tn in January 2025 to N34.22tn by December, marking the strongest annual expansion in government borrowing in recent years.

The increase was significantly higher than the N3.62tn rise recorded in 2024.

Private sector credit followed an opposing trajectory, falling from N77.38tn in January to N75.83tn in December, despite intermittent monthly recoveries that failed to offset deeper contractions earlier in the year.

Economists said the figures point to a classic crowding out effect, as banks channel funds into government securities offering high yields and low risk, leaving fewer resources available for productive private sector lending.

Commenting on the trend, the Director General of the Manufacturers Association of Nigeria, Segun Kadir Ajayi, said commercial banks increasingly prefer lending to government rather than businesses under current monetary conditions.

Ajayi said manufacturing firms have scaled back borrowing for expansion and raw material sourcing, citing interest rates that make credit unviable for operations and long term planning.

“The data clearly show the private sector is being crowded out,” Ajayi said, adding that many manufacturers are struggling with weak demand and limited cash flow.

Renowned economist and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, said the surge in government borrowing was largely driven by deficit financing through Treasury bills and bonds.

Yusuf noted that government instruments offer banks attractive returns with minimal risk, unlike private sector lending, which carries higher default exposure in a fragile economy.

Although the private sector still accounts for a larger share of total outstanding credit, Yusuf warned that the direction of credit flows is a growing concern for investment and economic growth.

He said persistently high interest rates have made borrowing prohibitively expensive for businesses, while government access to domestic funding remains largely unaffected.

The rise in government borrowing comes amid rising debt servicing costs, ongoing fiscal reforms, and the Central Bank’s tight monetary stance aimed at curbing inflation.

With inflationary pressures still elevated, analysts said restoring balance in credit allocation will be critical to support growth, job creation, and industrial expansion.

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As Nigeria navigates fiscal and monetary adjustments, the widening gulf between public and private sector borrowing is increasingly seen as a powerful indicator of strain within the financial system.