The Central Bank of Nigeria (CBN) said that credit to the Federal Government climbed by N11.33 trillion, or 57.11 percent, to N31.15 trillion in August from N19.83 trillion in July.
According to the CBN’s most recent Money and Credit Statistics, the three tiers of government have borrowed from commercial lenders in varying amounts over the last few months. In June, the credit figure was N23.93 trillion, up from N19.98 trillion in April but less than the N28.38 trillion reported in May.
The first quarter of the year also saw varied levels of borrowing, with credit hitting N23.52 trillion in January, peaking at N33.93 trillion in February, and falling to N19.59 trillion in March.
The steady borrowing trend highlights the Federal Government’s growing reliance on CBN facilities to fund capital projects, debt servicing, and other fiscal obligations. Economic analysts have raised concerns about the long-term sustainability of this borrowing, saying it could further strain the economy and contribute to inflationary pressures.
The report also revealed a dip of N777.13bn or 1.03 per cent in credit to the private sector, which stood at N74.73tn in August, down from N75.51tn in July. In January, private sector credit was N76.48tn but rose to N80.86tn in February.
However, credit dropped to N71.21tn in March. In the following months, it showed modest growth, rising to N72.92tn in April, N74.31tn in May, and settling at N73.19tn by June. In terms of currency in circulation, the total rose to N4.14tn in August from N4.05tn in July, reflecting an increase of N91.08bn or 2.25 per cent.
The combined total for government and private sector credit, along with money in circulation, amounted to N110.03tn in August, up from the previous month’s total, underscoring the ongoing fiscal and monetary dynamics in the Nigerian economy, with government borrowing dominating credit activities, crowding out the private sector. Afrinvest research explained that the CBN was in a difficult position, trying to balance inflation control with growth stimulation.
The Monetary Policy Committee of the CBN recently raised the monetary policy rate by 50 basis points to 27.25 per cent on Tuesday, the fifth consecutive rate hike this year.
Additionally, the cash reserve ratio for commercial banks was raised to 50 per cent and for merchant banks to 16 per cent. Those moves, it was said, were aimed at curbing excess liquidity and stabilising the exchange rate.
“While these policies may help control inflation, they also risk further tightening liquidity in the private sector and increasing borrowing costs, which could slow down economic growth,” Afrinvest warned.
The firm further advised that Nigeria needed a more balanced approach to fiscal management, stressing the need to stimulate private sector activity to achieve sustainable economic development.
Additionally, Nigeria’s total public debt reached N121.67tn in June 2024, up 24.99 per cent from N97.34tn recorded in December 2023.
