The Central Bank of Nigeria gave us data yesterday that showed that the federal government borrowed a lot more money from financial market operators in 2025, even though interest rates were high. This made it harder for people in the private sector to get credit.
According to The PUNCH, a review of money and credit figures indicated that lending to the federal government surpassed private sector borrowings by N9.19tn, a 695.6% rise in 2025. This was due to higher fiscal pressures and a greater reliance on local funding sources.
On the other hand, net credit to the private sector fell by N1.543tn in 2025. This shows how hard it is for firms to get credit when money is limited and interest rates are high. This difference showed that the distribution of resources in the financial system was becoming more uneven, with the public sector taking in a higher share of the available liquidity.
The trend shows a basic crowding-out effect: when the government needs more money, banks can’t lend as much to businesses that are productive. At the same time, many organized businesses are more focused on paying off their debts than taking on new ones.
In monetary and financial statistics, credit to government means money that the domestic financial system gives to the federal government. This is mostly done by buying government securities like Treasury bills, bonds, and other debt instruments, as well as by banks and other financial institutions lending money directly.
This type of credit is often used to cover budget shortfalls, refinance debts that are coming due, support capital and ongoing costs, and fill up short-term cash flow gaps when government revenues aren’t enough to cover spending needs.
On the other hand, credit to the private sector is the money that banks and other financial institutions lend to enterprises, families, and non-governmental groups. It is mostly used to pay for working capital, corporate growth, buying equipment and machinery, trade, farming, services, and consumer spending. Many people think that rise in private sector credit is a good sign of economic activity because it helps output, job creation, and overall economic growth.
When the government borrows a lot of money from the financial system, especially when interest rates are high, it can make it harder for private businesses to obtain money. This is often called “crowding out.” Even while the government gets money to pay its bills, this situation might make it more expensive for firms to borrow money and impede down investment.
We looked at CBN’s money and credit figures and found that credit to the federal government went up by N9.192tn in 2025, whereas credit to the private sector went down by N1.543tn over the same time period.
The data show that worries about crowding-out effects are growing. This is because the government is getting more and more interested in domestic funds while credit to enterprises and people is getting smaller.
The CBN data shows that credit to the public sector went up a lot in 2025, going from N25.03tn in January to N34.22tn by December. This represents an increase of N9.19tn over the course of the year. Compared to the N3.62tn government credit recorded in 2024, this was a growth of N5.57tn, or almost 154 percent.
A month-by-month look at government credit showed that it was N25.03tn in January 2025 and then went up by N2.08tn, or 8.3%, to N27.11tn in February. In March, it went down by N2.52tn (9.3 percent) to N24.59tn, and in April, it went down by N655bn (2.7 percent) to N23.93tn. In May, borrowing went down again, dropping by N946bn (4.0 percent) to N22.99tn. In June, it dropped by another N1.33tn (5.8 percent) to N21.66tn, which was the lowest level of the year.
In July, government credit rose by N2.03tn (9.4%) to N23.69tn, but in August it fell by N740bn (3.1%) to N22.95tn. In September, the pattern of rising continued, with credit going up by N1.21tn (5.3 percent) to N24.16tn. In October, it went up by N629bn (2.6 percent) to N24.79tn. In November, borrowing rose by N1.57tn (6.3 percent) to N26.35tn. Then, in December, it jumped by N7.87tn, or 29.9 percent, to end the year at N34.22tn.
On the other hand, net credit to the private sector fell by N1.54tn in 2025 because it was hard to get money and borrowing costs were high. Private sector credit fell from N77.38tn in January to N76.26tn in February, a reduction of N1.12tn or 1.4%. After that, in March, it went down slightly by N276bn (0.4%) to N75.98tn.
In April, borrowing went back up, going from N76.07tn to N78.07tn, a 2.7% increase. In May, it went down a little, from N77.97tn to N77.97tn, a 0.1% decrease. In June, credit dropped dramatically by N1.84tn (2.4 percent) to N76.13tn. In July, it rose slightly by N598bn (0.8 percent) to N76.72tn. In August, there was another drop of N841bn (1.1 percent) to N75.88tn. In September, there was a big drop of N3.36tn (4.4 percent) to N72.53tn, which was the lowest point of the year.
In October, private sector credit rose somewhat, going from N74.41tn to N74.63tn, a rise of N220bn (0.3 percent). In November, it rose again, this time by N1.88tn (2.6 percent). In December, borrowing went up by N1.20tn (1.6 percent), bringing the total to N75.83tn, which is still far lower than the amount in January.
In 2024, government borrowing from the financial system went up by N3.62tn, which is a lot less than the N9.19tn increase in 2025. Private sector credit, on the other hand, went up by N1.54tn in 2024 but then went down by N1.543tn in 2025.
A study of borrowing from the domestic financial system shows that government credit climbed considerably in 2025 compared to 2024. For example, credit to the Federal Government rose from N23.52tn in January 2024 to N25.03tn in January 2025.
In January 2025, government credit was N25.03tn, which is N1.51tn or 6.4% more than the N23.52tn that was recorded in January 2024. By February, credit had grown to N27.11tn, which is a huge N8.69tn or 47.2% rise from N18.43tn in February 2024.
In March, though, the government only borrowed N24.59tn, which is still N4.54tn or 22.6% more than N20.05tn in March 2024. In April, credit was N23.93tn, which is N3.96tn, or 19.8%, more than the N19.98tn it was in April 2024.
In May, CPS fell from N28.38tn in May 2024 to N22.99tn in 2025, which is N5.39tn or 19.0 percent less than the N28.38tn recorded in May 2024. In June, credit continued to fall, reaching N21.66tn, which is N2.27tn or 9.5% less than the N23.93tn it was in June 2024.
In July, government borrowing was also lower than it was in 2024, at N23.69tn. This was N3.87tn or 19.5% more than July 2024’s N19.83tn, which shows that things are getting better. In August, credit fell drastically from the previous year to N22.95tn, a dip of N8.20tn or 26.3% from N31.15tn in August 2024.
CPS was N24.16tn in September, which is a big decline of N15.31tn or 38.8% from the N39.47tn reported in September 2024. In October, government credit was N24.79tn, which is N14.60tn or 37.1% less than the N39.39tn it was in October 2024.
In November, credit went up to N26.35tn, but it was still N13.26tn, or 33.5 percent, down than the N39.62tn reported a year earlier. But by December, borrowing had risen to N34.22tn, which was N7.08tn or 26.1% more than the N27.14tn borrowed in December 2024. This led to an overall yearly increase of N9.19tn in 2025.
There was a different pattern in private sector borrowing. In January 2025, credit was N77.38tn, which is N898bn or 1.2% more than N76.48tn in January 2024. In February, though, borrowing fell to N76.26tn, a dramatic N4.97tn or 6.1 percent drop from the N81.22tn reported in February 2024.
In March, private sector credit was N75.98tn, which is N4.55tn or 6.4% more than the N71.43tn it was in March 2024. April also saw an increase, with credit jumping to N78.07tn, which is N5.15tn or 7.1% more than it was a year earlier at N72.92tn.
By May, borrowing has grown to N77.97tn, which is N3.66tn or 4.9% more than the N74.31tn that was borrowed in May 2024. In June 2024, credit was N73.19tn. In June 2024, it was N76.13tn, which is N2.94tn or 4.0% more.
In July, the trend changed and credit fell to N76.72tn, which was just N1.22tn or 1.6 percent more than N75.51tn in July 2024. In August, borrowing fell to N75.88tn, which is N1.15tn or 1.5% more than N74.73tn in August 2024. This shows that things are not moving forward.
In September, private sector credit dropped drastically to N72.53tn, a drop of N3.31tn or 4.4% from N75.83tn in September 2024. October came next with N74.41tn, which was a little increase of N339bn or 0.5% over N74.07tn in October 2024.
In November, borrowing fell to N74.63tn, which is N1.33tn or 1.8% less than the N75.96tn borrowed in November 2024. By December, credit was at N75.83tn, which was a N2.19tn or 2.8% drop from the N78.02tn reported in December 2024. This meant that 2025 had a net loss of N1.54tn.
Segun Kadir Ajayi, the Director-General of the Manufacturers Association of Nigeria, spoke on behalf of the Organized Private Sector and the manufacturing industry. He claimed that credit data from the financial system show that government demand is clearly crowding out private sector borrowing.
Ajayi told me over the phone yesterday that the trend shows that commercial banks and other financial institutions prefer to lend to the government because of lower interest rates and a reduced risk, which hurts productive parts of the economy.
“The data shows a trend that proves something,” the MAN DG added. When you see trends like these, it usually means that the private sector is having a hard time getting loans. When you borrow, you have to pay it back, thus the interest rate at which you borrow is quite important for your business. Commercial banks and other financial institutions find it far easier to lend to the government than to the private sector.
Ajayi said that the manufacturing industry has been hit the worst. Because of high expenses and a sluggish economy, many companies have cut back on borrowing to grow and get raw materials.
He says that the slowdown in private sector credit is in line with the overall lack of economic growth, which is due to weak consumer demand and a lack of liquidity in the system.
“You’ve also learned that the industrial sector has been having problems, so borrowing for growth and getting raw materials has been low-key. You would expect less credit because there hasn’t been much activity in terms of purchases or accessible dollars. So you should expect this kind of tendency. He went on to say, “Many manufacturers just can’t afford to take on expensive credit.”
He did say, though, that the event shows how important it is for the government to step in and help the economy thrive through targeted financing.
“But this means that the government should be careful about making low-cost credit available to the sector so that you can get them to want to borrow more money and work to grow and scale instead of paying the banks.” He said, “This is just the simple explanation.”
How the economist reacts
Muda Yusuf, a well-known economist and CEO of the Centre for the Promotion of Private Enterprise, said in his expert opinion on the matter that the federal government borrowing more and more from the domestic financial system is pushing the private sector out of the market. This is because banks prefer low-risk, high-yield government securities over lending to businesses.
Yusuf said that even though the private sector still has a bigger share of total outstanding credit in absolute terms, the direction of credit flow is becoming more of a worry.
There are a variety of reasons why the government has been able to borrow more money. The government has been getting money to pay off the debt. This funding of the deficit has led to the sale of bonds, treasury bills, and other things that banks also buy. Yusuf told our correspondent over the phone that the rate is quite appealing to them, much more so than financing to the real industry.
He says that the rise in government borrowing is mostly due to the necessity to cover growing budget deficits. This has led to more Treasury bills, bonds, and other government securities being issued. Yusuf said that the current interest rate environment has made banks much more likely to choose government assets.
“The second point is that financing to the government is relatively low-risk because it is a sovereign debt, and the government can’t come back to you and say they won’t pay it back. It won’t happen. Except for those contractors in the area. But if it is through the banking system, they get money by selling government bonds. He continued, “So the risk is low, the rates are very good, and the banks usually prefer this option because it makes them feel better.”
He went on to say that borrowing money from the government through the banking system had a very low chance of default, unlike borrowing money from the private sector.
“If it is through the financial system, money is raised by selling government bonds. “The risk is low, the rates are good, and banks like that option better,” Yusuf said. “Giving money to the private sector is riskier for them.”
He claimed that because of this, the private sector is having a harder time getting loans than the government. He said, “In that sense, you could say that the government is slowly pushing the private sector out.” “Credit-wise, they can’t compete with the government.” Bonds have a minimal risk but a high interest rate.
Yusuf said that this situation has made people more likely to want the government to borrow less. Yusuf said that high interest rates are a big reason why people in the private sector don’t borrow or invest.
He said that the government can get money by selling bonds without having to deal with banks for loans, while private enterprises have to deal with stricter restrictions.
“There’s a little bit of crowding out, and that’s why some people say the government should borrow less so it doesn’t crowd out the private sector.”
The second point about the private sector is that the interest rate is still high. So you can’t undertake any business with credit that is more than 30% of the total. The interest rate set by the government is still 27%. The government simply has to issue bonds; they don’t have to go to banks for loans. The state government only has to go to the government for loans and pay them back through FAAC allocations. He added, “These are some of the problems.”
Yusuf argued that authorities should be very worried about what falling private sector lending means for the economy.
“Of course, it shows that the economy isn’t doing well. The government should be worried about this because how do you want to get people to invest when the interest rate is that high? It should be a worry. The private sector borrows money to invest, so if it’s not there, it will hurt growth. The government is just borrowing money to cover the deficit.
“We want the banks to help the private sector more than they do currently. You can also compare what other banks in other nations are doing. You would see that it is lower than in other countries. He warned, “Our credit to the private sector compared to Gross Domestic Product shows how well the financial system is supporting the sector.”
The economist also said that Nigeria’s private sector credit levels are still low compared to other nations in the region. Yusuf stated that to fix the problem, interest rates would have to go down, the government would have to borrow less, and income would have to be collected more effectively.
He also said that making more money will help the banking system. “The only way to fix this is to change the economy so that borrowing costs less.” Recapitalization can benefit major investments, but the interest rate needs to go lower. The rate of inflation needs to go down. Yusuf said, “The government should borrow less and focus on making money so that the money can go to the private sector.”
The government is borrowing more money because it is under constant financial pressure, such as rising costs of servicing debt, falling revenues, and higher expenditure responsibilities after changes to fuel subsidies and exchange rates.
At the same time, the CBN’s strict monetary policy, which is based on high interest rates to keep inflation in check, has made borrowing more expensive for everyone, but the private sector has been hit the hardest.
Stakeholders agree that a rebalancing of credit allocation will be necessary to support growth, job creation, and industrial expansion while inflationary pressures continue and interest rates stay high.
As Nigeria continues to make changes to its fiscal and monetary policies, the growing gap between public and private sector borrowing is likely to remain a crucial sign of the financial system’s health or stress.
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