Businesses Strangled as FG’s Domestic Borrowing Explodes 90% to N24.7trn, Leaving Local Firms Starved of Loans

A massive borrowing spree by the Federal Government is sucking liquidity out of Nigeria’s financial system, leaving manufacturers, entrepreneurs, and small businesses stranded without access to affordable commercial credit.

Official financial market data reveals that domestic borrowing surged by 90.5 percent year-on-year, hitting ₦24.7 trillion in the first eight months of the year compared to ₦12.98 trillion raised over the same period previously. The borrowing blitz—driven primarily by aggressive sales of Nigerian Treasury Bills (NTBs), Federal Government Bonds, and retail savings bonds—has pushed public borrowing to 84.7 percent of its statutory annual domestic target. Sucking up an average of over ₦3 trillion each month, the administration is now positioned to overshoot its fiscal deficit ceiling before the year wraps up.

This aggressive appetite for domestic debt has triggered a classic “crowding-out” crisis across the economy. Central Bank data shows credit extended to the government rose by 43 percent year-on-year to ₦33.92 trillion, while credit to the private sector expanded by an anaemic 9.6 percent. In effect, banking credit to the state expanded four-and-a-half times faster than lending to private enterprises.

Financial analysts explain that commercial lenders have found it far more profitable and virtually risk-free to channel depositors’ funds into lucrative government securities with yields well above 20 percent, rather than taking chances on real-sector businesses battling inflation, power deficits, and logistics headaches. For local enterprises, the few loans that remain available come attached with prohibitive interest rates hovering around 30 percent or higher, pricing factory owners and merchants out of working capital.

The scale of this borrowing binge has baffled market watchers because it coincides with supposedly record revenue windfalls. Key fiscal agencies, including the Federal Inland Revenue Service, the Nigeria Customs Service, and the Nigerian National Petroleum Company Limited (NNPCL), have trumpeted record-breaking collection numbers. Combined with the trillions in naira generated from the floating of the foreign exchange rate and the removal of petrol subsidies, government coffers should theoretically be flush.

Instead, public expenditure has continued to accelerate far ahead of earnings. Huge debt-service obligations, ballooning recurrent operational costs, and capital allocations have created a widening budget deficit, compelling debt managers to return repeatedly to domestic capital markets.

Private sector groups, including the Centre for the Promotion of Private Enterprise (CPPE) and various industrial bodies, have cautioned that this borrowing momentum carries severe consequences. By devouring bank loanable funds to pay down short-term public obligations, the state is actively suffocating private sector-led expansion, depressing domestic purchasing power, and forcing struggling employers into retrenchments.

Economic analysts warn that unless authorities rein in extra-budgetary commitments, block public waste, and allow financial institutions to return to their core function of financing private enterprise, the nation risks choking off the very businesses expected to drive real economic growth.