By Bakare Ogunleye
As Nigeria’s debt appetite continues to swell, analysts warn that the federal government’s growing reliance on domestic bond issuance is crowding out private sector access to capital, threatening long-term economic competitiveness.
In recent years, the government has increasingly turned to the domestic bond market to plug budget deficits, raising trillions of naira through Nigerian Treasury Bills (NTBs), FGN Bonds, and Sukuk. While these instruments have helped fund critical infrastructure and manage fiscal shortfalls, they have inadvertently drained liquidity from the banking system and diverted credit away from productive private enterprises.
Financial experts say commercial banks, pension funds, and institutional investors now find government securities more attractive due to their perceived safety and higher yields — leaving fewer resources available for loans to businesses, especially small and medium enterprises (SMEs) that drive job creation and innovation.
“Nigeria’s debt strategy is becoming a double-edged sword,” said an economist at a leading investment firm in Lagos. “While it ensures short-term financing for government operations, it weakens private sector growth by absorbing capital that could have gone into manufacturing, agriculture, or tech startups.”
Data from the Central Bank of Nigeria (CBN) show that credit to the private sector has stagnated in real terms despite rising liquidity in the system — a trend many attribute to risk-averse lending practices and the allure of risk-free government debt.
As the national debt approaches ₦121 trillion, experts are calling for a more balanced fiscal approach that includes widening the tax base, curbing recurrent expenditure, and leveraging public-private partnerships (PPPs) to finance development without stifling the private sector.
The mounting concern is that if this trend continues unchecked, Nigeria may miss out on the full benefits of a dynamic, investment-led economy — one driven by private capital and enterprise, not just government borrowing.
