Nigeria's Domestic Borrowing Strains Private-Sector Credit

Nigeria's increasing dependence on domestic borrowing is creating competition for bank credit, raising concerns that attractive yields on government securities may limit affordable credit for businesses and households. The Federal Government is financing large fiscal deficits through the domestic market, with Nigerian banks being significant buyers of government securities.

The International Monetary Fund (IMF), in its 2026 Article IV assessment, noted that banks' holdings of government securities account for about 22% of total bank assets. While private-sector credit has marginally expanded, rising to approximately ₦83.43 trillion in July 2026 from ₦81.04 trillion in May, it remains below the February 2026 peak of ₦94.61 trillion.

The IMF projects a 14.2% increase in private-sector credit for 2026. The concern is whether government borrowing will continue to dominate financial resources, hindering long-term lending to manufacturers and SMEs.

The domestic debt market's elevated yields attract various investors, but manufacturers may struggle to secure affordable financing, affecting their investment plans.