This study examines the crowding-out effect of domestic debt on private infrastructure financing in Nigeria using annual time-series data covering the period 1985–2024. The primary objective is to investigate whether increasing government domestic borrowing constrains the availability of credit to the private sector, which is a key source of financing for infrastructure development. Credit to the private sector (CPS) was used as a proxy for private infrastructure financing, while domestic debt (DDD), interest rate (INT), and gross domestic product (GDP) were included as explanatory variables. The study employed descriptive statistics and unit root tests to examine the statistical properties of the data, while the Autoregressive Distributed Lag (ARDL) model was used to estimate the dynamic relationship among the variables. The empirical results show that domestic debt has a significant positive effect on credit to the private sector in the short run, suggesting that moderate government borrowing may initially stimulate financial sector activities. However, the lagged effect of domestic debt was found to be negative and statistically significant, indicating that persistent government borrowing from the domestic financial market may eventually reduce the funds available for private sector investment. This finding supports the crowding-out hypothesis, which posits that excessive government borrowing competes with private sector demand for loanable funds. The results further reveal that interest rate has a negative but statistically insignificant effect on private sector credit, while economic growth exhibits weak positive lagged effects. The study concludes that although domestic debt can support government financing needs, excessive reliance on domestic borrowing may constrain private sector access to finance, particularly for infrastructure investment. The paper therefore recommends prudent domestic debt management, development of alternative infrastructure financing mechanisms such as public–private partnerships, and further deepening of the financial sector to ensure sustainable private sector participation in infrastructure development in Nigeria.