FG’s N9trn borrowing surge squeezes credit to businesses – CBN

The Federal Government’s domestic borrowing jumped sharply in 2025, crowding out businesses and widening the gap between public and private sector access to credit, according to Central Bank of Nigeria (CBN) data.

Money and credit statistics show that government borrowing from the financial system rose by N9.19tn during the year, while net credit to the private sector fell by N1.54tn, highlighting the impact of high interest rates and tight liquidity on businesses.

Credit to the Federal Government increased from N25.03tn in January to N34.22tn in December 2025. In contrast, private sector credit dropped from N77.38tn at the start of the year to N75.83tn by year-end.

Analysts say the trend reflects a classic “crowding-out” effect, where heavy government demand for funds limits banks’ ability to lend to businesses. With Treasury bills and bonds offering attractive returns and lower risk, banks are prioritising lending to the government over the productive sector.

The Manufacturers Association of Nigeria said the development has constrained firms’ ability to borrow for expansion and raw materials, as many companies avoid costly loans amid weak demand and high borrowing rates.

“The private sector is being crowded out. Banks find it easier and safer to lend to government than to businesses,” said MAN Director-General, Segun Ajayi-Kadir, calling for deliberate policies to provide cheaper financing for industry.

Economist and CEO of the Centre for the Promotion of Private Enterprise, Muda Yusuf, also warned that rising government borrowing and interest rates — with the Monetary Policy Rate at 27 per cent — are discouraging investment.

“There is no business that can survive on credit at nearly 30 per cent. Government bonds are safer and more attractive, so banks prefer them. That limits funds available to the real sector,” he said.

The surge in borrowing is linked to growing fiscal pressures, including deficit financing, debt servicing and revenue shortfalls, forcing the government to rely more on local debt markets.

Stakeholders say unless borrowing costs fall and the government reduces its appetite for domestic credit, businesses may continue to struggle to access funds needed for growth, jobs and industrial expansion.