Nigeria govt credit jumps N17.39tn YoY as banks favor safe govt debt

Credit to the Nigerian government jumped N17.39 trillion year-on-year to reach N40.38 trillion in May 2026, up 75.6% from N22.99 trillion in May 2025. Month-on-month, government credit rose N779.70 billion (2.0%) from N39.60 trillion in April 2026. Meanwhile, private-sector credit increased modestly to N81.04 trillion in May 2026, up N456.21 billion (0.57%) from April and N3.07 trillion from May 2025.

The surge reflects banks’ preference for low-risk government securities in a high-interest-rate environment, with the Monetary Policy Rate held at 26.5% after a 50-basis-point cut earlier this year. Experts warn this trend raises crowding-out risks, as banks may favor sovereign debt over lending to businesses and households, potentially squeezing credit available to the productive sector. Private-sector credit remains about twice government credit but is growing more slowly.

The CBN retained the MPR at 26.5% at its May 2026 meeting, having reduced it by 50 basis points from 27% earlier. Analysts say the continued appeal of government yields will keep influencing bank portfolios unless yields decline or private-sector lending becomes more attractive. The balance between public borrowing needs and private-sector financing will be a key metric to watch. Will banks shift lending back to businesses if yields fall, or will high public borrowing continue to crowd out private sector credit?

SOURCE: https://nairametrics.com/2026/06/24/cbn-credit-to-government-jumps-n17-39-trillion-in-one-year/