By Ifeanyi Nwegbu
The Central Bank of Nigeria (CBN) has warned that Nigeria’s projected N12 trillion public debt in 2026 could significantly tighten liquidity in the private sector, raising borrowing costs and slowing business growth.
In its latest 2026 Macroeconomic Outlook, the apex bank cautioned that heavy government borrowing could absorb a large share of available funds, leaving commercial banks with less capacity to lend to private enterprises and households.
“Projected public debts may worsen private sector liquidity and raise interest rates,” the CBN said, highlighting the risks associated with rising government borrowings next year. (guardian.ng)
Analysts warn that the situation may trigger a crowding-out effect, where government borrowing competes with private sector credit, forcing banks to prioritise safer government securities over loans to businesses. Experts say this could particularly impact small and medium-sized enterprises (SMEs), manufacturers, and sectors reliant on credit for expansion.
The CBN also noted that while Nigeria’s economy shows signs of recovery — including projected 4.49% growth in 2026 and rising foreign exchange reserves – unchecked borrowing could offset these gains by tightening liquidity and increasing interest rates.
Financial experts are calling for coordinated fiscal and monetary measures to prevent public debt from undermining private sector financing and stalling economic momentum in the new year.
