Stock of credit to the government stood at N34.19 trillion in January, a 36.6 per cent increase from N25.03 trillion at the end of January 2025, according to money and credit data obtained from the Central Bank of Nigeria (CBN).

While credit to the government has risen sharply, that of the private sector has stalled over the past two years, hovering around N76 trillion. In the past year, it dipped from N77.38 trillion to N75.24 trillion or nearly three per cent.

Though the decline was moderate, the growth of credit to the public sector during the tapering suggested the rising risk premium of the private sector and rising preference for risk-free lending among creditors.

Overall, net domestic credit expanded by almost seven per cent, from N102.41 trillion in January 2025 to N109.43 trillion, suggesting a healthy performance considering the restrictive credit market.

The growth was driven by rising credit to the government at the expense of the private sector employers.

Credit availability to the private sector increases their ability to scale, diversify and create jobs. But when the operators are starved, economic growth is stifled, which affects their capacity to create new jobs.

The divergence of credit growth to the government and private sector came during a heightened monetary tightening that kept the anchor interest rate at around 27 per cent and the transaction corridor around 30 per cent.

The ultra-high monetary policy rate (MPR) pushed up the commercial lending rate to as much as 37 per cent and triggered widespread loan repricing.

Businesses that could not service their facilities at the new interest rates had to liquidate existing loans ahead of maturity. Fresh loan applications also dropped to a trickle as reflected in the credit expansion data of some of the deposit money banks (DMBs).

In the two years, credit to the private sector expanded, but at a decreasing rate compared to 2023. According to data, from January 2024 to January 2025, the figure grew by 1.2 per cent. In the previous year, the growth was aggressive – at 84.1 per cent or from N41.54 trillion to N76.48 trillion.

Interestingly, that happened during a political transition that was laced with pro-market reforms, which were hailed internationally as a sign that the country was ready for a major economic reset. The fuel subsidy was removed just as the foreign exchange (FX) market was liberalised.

Then, the growth of credit to the government was low and volatile. In 2023, the figure dropped by nearly a dozen per cent only to bounce back to slightly above the December 2022 position at the end of 2024.

Last year’s growth in lending to the government was the most aggressive in recent years. Oversized public sector borrowing has a decaying effect on the private sector as it crowds out capital available for new factories and other job-creating activities.

In January, currency outside banks stood at N5.21 trillion, which was nearly 91 per cent of the currency in circulation, estimated at N5.73 trillion. The percentage was slightly above 90.05 per cent recorded in January 2025, suggesting a somewhat slow speed to financial inclusion.