Credit to Government Falls to N32.7 Trillion as Private Sector Lending Rises

 

Credit to the Nigerian government fell for the third consecutive month in August 2026, declining to N32.70 trillion as lending to the private sector continued to recover, according to the latest money and credit data from the Central Bank of Nigeria (CBN).

Government credit fell from N33.92 trillion in July, representing a monthly decline of about N1.22 trillion, or 3.60%.

The decline extends a downward trend that began in June, when government credit fell from N40.38 trillion in May to N40.03 trillion.

By August, government credit had declined by about N7.68 trillion, or 19.0%, from its May level.

At the same time, credit to the private sector increased for the third consecutive month, reaching N84.55 trillion in August from N83.43 trillion in July.

What you should know

The latest figures show a notable shift in the direction of domestic credit.

Government credit has been declining since May, while private-sector credit has been increasing since May.

Private-sector credit rose from N81.04 trillion in May to N83.26 trillion in June, N83.43 trillion in July and N84.55 trillion in August.

The August figure represents a monthly increase of about N1.13 trillion, or 1.35%, and is 11.4% higher than the N75.88 trillion recorded in August 2025.

However, private-sector credit remains below the N94.61 trillion recorded in February 2026, meaning the recent recovery has not fully reversed the contraction recorded earlier in the year.

Government credit has fallen sharply since May

The decline in government credit has been relatively substantial over just three months.

Month	Credit to government
May 2026	N40.38tn
June 2026	N40.03tn
July 2026	N33.92tn
August 2026	N32.70tn

This means government credit has fallen by approximately N7.68 trillion since May.

However, the CBN data does not explain what specifically caused the decline.

It does not establish whether the reduction reflects lower government borrowing from the banking system, repayments, changes in the valuation of certain positions, changes in the composition of government financing, or other balance-sheet movements.

That distinction matters because a decline in the measured stock of government credit should not automatically be interpreted as evidence that the government has reduced its overall borrowing.

Private-sector credit continues to recover

The private sector is moving in the opposite direction.

Credit increased by N3.51 trillion between May and August, representing growth of about 4.3% over the period.

The increase suggests that aggregate bank lending to businesses and other private-sector borrowers has been recovering after the sharp decline recorded earlier in 2026.

However, the headline figure does not show where the new credit is going.

The CBN’s latest data does not provide a sectoral breakdown for August, making it difficult to determine whether the increase was concentrated in manufacturing, trade, agriculture, real estate, energy, consumer lending or other areas.

Credit remains below the February peak

Despite the recent recovery, private-sector lending remains well below its February level.

Credit to the private sector reached N94.61 trillion in February, before falling to about N80.59 trillion in April.

The August figure of N84.55 trillion therefore represents a recovery from the April low, but it remains approximately N10.06 trillion below the February peak.

This suggests that the recent improvement should be viewed as a recovery in lending rather than a return to the strongest credit conditions seen earlier in the year.

High interest rates remain a major consideration

The recovery in private-sector credit is taking place against a backdrop of relatively high borrowing costs.

Before the latest monetary-policy decision, the CBN had maintained its Monetary Policy Rate at 26.50% at its July 2026 meeting.

The high-rate environment has increased the cost of borrowing for businesses and households, meaning an increase in the stock of credit does not necessarily mean credit has become cheap or broadly accessible.

The terms on which loans are provided remain important.

A business taking on more debt at a high interest rate faces a different economic outcome from one receiving longer-term financing at a substantially lower cost.

Rising credit does not mean every sector is benefiting

Aggregate private-sector credit can increase even when individual industries experience declining access to bank financing.

Earlier CBN data showed differences across sectors, with credit to some areas increasing while lending to others declined.

This means the N84.55 trillion figure should not be interpreted as evidence that all Nigerian businesses are experiencing easier access to finance.

The composition of the credit is just as important as the total amount.

For manufacturers, farmers, traders and other productive businesses, the key question is whether additional lending is reaching activities capable of increasing production, employment and investment.

The shift could have implications for domestic credit allocation

The widening gap between government and private-sector credit is also noteworthy.

In August, credit to the private sector stood at about N84.55 trillion, compared with N32.70 trillion for government.

That leaves a difference of roughly N51.85 trillion between the two categories.

A sustained shift toward private-sector lending could potentially improve the availability of financing for businesses, particularly if banks direct credit toward productive economic activities.

However, the quality, pricing and duration of those loans will determine how significant the shift becomes for the wider economy.

Total domestic credit remains relatively stable

Despite the opposing movements in government and private-sector credit, total net domestic credit was broadly stable in August.

CBN data showed net domestic credit at approximately N117.25 trillion in August, compared with N117.35 trillion in July and N123.29 trillion in June.

This is important because it suggests that the fall in government credit was accompanied by increased private-sector credit rather than a similarly large contraction in overall domestic credit.

In other words, part of the change in the composition of credit appears to have been a shift between sectors.

Money supply also increased slightly

The CBN data also showed a modest increase in broad money during August.

Money supply measured by M3 increased to N139.38 trillion from N138.78 trillion, while M2 rose to approximately N139.37 trillion from N138.77 trillion.

The increase indicates that overall monetary liquidity was not contracting at the same pace as government credit.

However, money-supply growth and credit growth are related but different measures, and neither provides a complete picture of the availability of finance to individual businesses or households.

What the figures mean for businesses

For businesses, the increase in private-sector credit could be positive if it translates into greater access to working capital, investment financing and expansion loans.

But the cost of that financing remains crucial.

High interest rates can make borrowing unattractive even when banks are willing to lend.

Companies therefore have to consider whether the expected return from borrowing exceeds the cost of servicing the debt.

For banks, the recovery in private-sector lending also brings the need to balance credit expansion with asset quality and repayment risks.

What investors should watch

Several developments will be important in determining whether the current trend continues:

• Whether government credit continues falling in the coming months.
• Whether private-sector credit can move back toward its February peak.
• Which sectors are receiving the additional private-sector lending.
• The average cost and maturity of new loans.
• Banks’ non-performing loan levels.
• The effect of the CBN’s recent monetary-policy easing on lending costs.
• Whether lower policy rates translate into stronger private-sector credit growth.
• Whether increased lending translates into higher economic output and investment.

The sectoral distribution of future credit data will be particularly important because a rise in the aggregate figure does not necessarily mean productive businesses are receiving more financing.

The bigger picture

Nigeria’s domestic credit market is showing a clear change in direction.

Credit to government has fallen sharply for three consecutive months, while private-sector credit has increased for three consecutive months.

That shift could eventually become important for economic growth if more bank financing moves toward businesses and productive investment.

However, the data alone does not establish why government credit declined, nor does it show that the government has necessarily reduced its overall borrowing.

Similarly, the rise in private-sector credit does not automatically mean businesses are enjoying cheaper or easier financing.

The more important question is what happens next: whether private-sector credit continues to recover, where that credit goes, and whether the recent monetary-policy shift can turn higher lending into stronger investment and economic activity.