The Federal Government’s borrowing through FGN bonds more than doubled in the first nine months of 2026, with the sharp increase putting fresh focus on how government demand for domestic funds could affect credit available to businesses.
The government allotted N7.15 trillion in FGN bonds between January and September 2026, representing a 106% increase from the N3.48 trillion allotted during the same period in 2025, according to Nairametrics’ analysis of Debt Management Office auction results published on October 1, 2026.
The increase was driven by sharp rises in several months. January allotments rose 157% to N1.54 trillion from N601.04 billion a year earlier, while June allotments climbed to N1.22 trillion from N100 billion.
July recorded N931.82 billion, up 401% from N185.93 billion, while August rose 491% to N805.16 billion from N136.16 billion. September allotments increased 29.8% to N748.64 billion from N576.62 billion, Nairametrics reported.
Investor demand was also strong. Total subscriptions for the nine-month period reached N13.72 trillion, substantially above the N7.15 trillion eventually allotted. The gap indicates that investors were willing to commit considerably more funds to government securities than the amount the government took up during the auctions.
The heavier bond issuance comes against a rising public debt stock. The Debt Management Office reported total public debt of N166.79 trillion as of June 30, 2026, up from N159.35 trillion at the end of March. Domestic debt accounted for N91.59 trillion, or 54.91% of the total.
FGN bonds remained the largest component of Federal Government domestic debt, with an outstanding value of N64.84 trillion as of June 30, according to the DMO data reported by Nairametrics.
The government also has access to a large pool of domestic institutional savings. PenCom data reported on October 2 showed pension assets rising to N31.8 trillion as of August 31, with N17.80 trillion invested in Federal Government securities. The securities represented the largest single investment category in the pension industry.
The concentration of institutional funds in government securities is important because the same financial system also provides funding to private businesses. When government securities offer attractive returns, banks and other investors may have less incentive to take on the higher risks associated with private-sector lending.
However, the latest credit data does not show that government borrowing has already displaced private-sector credit.
CBN data showed credit to the government falling from N40.03 trillion in June to N33.92 trillion in July and N32.70 trillion in August. Over the same period, credit to the private sector increased from N83.26 trillion in June to N83.43 trillion in July and N84.55 trillion in August, Nairametrics reported on September 22.
That suggests the relationship between government borrowing and private-sector credit is more complicated than a direct one-for-one trade-off. Banks can increase lending to businesses even while the government raises funds, depending on liquidity conditions, risk appetite, monetary policy and the returns available across different assets.
The Central Bank of Nigeria cut the Monetary Policy Rate by 350 basis points to 23% at its September 21-22, 2026 meeting, while retaining the cash reserve requirement for deposit money banks at 45%.
The central issue, therefore, is not whether the Federal Government’s N7.15 trillion bond borrowing has already crowded out businesses, but whether sustained reliance on domestic debt could increase competition for funds and keep borrowing costs high for the private sector.
For Nigerian businesses, the impact will ultimately be measured in the availability, pricing and terms of bank credit. As government borrowing expands, the ability of the financial system to finance private investment alongside the government’s fiscal needs will remain a key test for the economy.
