The Federal Government’s domestic borrowing from the financial system surged sharply in 2025, deepening concerns over reduced access to credit for businesses as public sector demand crowded out private sector borrowing.
Data from the Central Bank of Nigeria show that credit to the Federal Government rose by N9.19 trillion in 2025, while net credit to the private sector contracted by N1.54 trillion over the same period. The divergence reflects heightened fiscal pressures and the government’s growing reliance on local funding sources amid high interest rates.
Analysis of the money and credit statistics indicates that government borrowing from banks and other financial institutions far outpaced private sector lending, widening the gap in access to available liquidity. Economists warn that this imbalance has constrained credit flow to productive sectors of the economy, limiting business expansion and investment.
Credit to the Federal Government increased from N25.03 trillion in January 2025 to N34.22 trillion by December, marking a significant rise compared with the N3.62 trillion increase recorded in 2024. The sharpest spike occurred in December, when government borrowing jumped by nearly N8 trillion in a single month.
In contrast, private sector credit declined steadily amid tight monetary conditions and elevated borrowing costs. Loans to businesses and households fell from N77.38 trillion in January to N75.83 trillion in December, reversing the N1.54 trillion growth recorded in 2024.
The decline highlights the impact of high interest rates and limited liquidity on business confidence, as many firms focused on debt servicing rather than new borrowing. Analysts describe the trend as a classic crowding out effect, where increased government demand for funds reduces banks’ capacity to lend to the private sector.
Experts warn that prolonged crowding out could slow economic growth, weaken job creation, and further strain businesses already grappling with inflation, high energy costs, and foreign exchange pressures. They stress the need for fiscal discipline and improved revenue mobilisation to ease pressure on domestic credit markets and support private sector led growth.
