Government borrowing jumps 75.6%: What it means for the naira and your pocket
By Aboki Forex —
Fresh data from the Central Bank of Nigeria shows credit to the Federal Government hit N40.38 trillion in May 2026. That is up from N22.99 trillion in May 2025. It is a 75.6% jump in just one year.
From April to May alone, government borrowing rose by another N779.7 billion. Meanwhile, credit to the private sector grew slowly to N81.04 trillion.
The story is clear. The government is borrowing heavily. Banks are cautious about lending to businesses and households.
What this means for inflation
When the government borrows this much from banks, it puts new money into the economy. Banks buy Treasury Bills and Bonds instead of lending to businesses. The government spends that money on salaries, projects, and debt payments.
More money chasing the same goods pushes prices up. Net domestic credit hit N121.42 trillion in May. When money supply grows faster than goods and services, inflation follows.
Food prices and transport costs rise faster during periods of heavy government borrowing. For the average Nigerian buying garri, rice, or fuel, the cost of living stays painful.
Impact on interest rates
Banks prefer lending to the government because it is safer. They earn good returns on government securities. This means less money available for business loans and personal borrowing.
When banks lend less to the private sector, they charge higher interest rates to the few who qualify. This makes it harder for small businesses to expand and create jobs.
What it means for the naira
Heavy government borrowing can weaken the naira. When the government spends borrowed money, some of it goes to import goods and services. This increases demand for foreign currency.
More demand for dollars and other foreign currencies puts pressure on the naira. If supply does not keep up, the naira loses value.
The bottom line: more government borrowing means higher inflation, higher interest rates, and a weaker naira. Nigerians will feel it in their daily expenses and business costs.