The Central Bank of Nigeria (CBN) has disclosed that credit to the Federal Government surged by N11.33 trillion, representing a 57.11% increase, rising from N19.83 trillion in July to N31.15 trillion by August 2024. The CBN’s latest Money and Credit Statistics highlighted a pattern of fluctuating borrowing by the Federal, State, and Local governments from commercial lenders.
Earlier in the year, credit figures showed similar volatility. In June, borrowing stood at N23.93 trillion, slightly down from N28.38 trillion in May but still higher than the N19.98 trillion reported in April. Credit peaked at N33.93 trillion in February, following a steady rise from N23.52 trillion in January, before dropping to N19.59 trillion in March.
This borrowing trend underscores the Federal Government’s increasing reliance on CBN facilities for funding capital projects, debt servicing, and other fiscal responsibilities. Economic analysts have raised concerns over the long-term sustainability of this borrowing, cautioning that it could burden the economy and drive inflationary pressures.
In contrast, credit to the private sector experienced a slight dip. In August, private sector borrowing decreased by N777.13 billion, or 1.03%, to N74.73 trillion, down from N75.51 trillion in July. Private sector credit had been N76.48 trillion in January but saw fluctuations throughout the year, reaching N80.86 trillion in February before dropping to N71.21 trillion in March. Modest growth followed in subsequent months, but the August figure indicated a reduction.
Additionally, the report revealed an increase in currency circulation, which rose to N4.14 trillion in August, up by N91.08 billion from July’s N4.05 trillion, reflecting a 2.25% increase.
The cumulative total for government and private sector credit, along with currency in circulation, amounted to N110.03 trillion in August, highlighting the ongoing fiscal dynamics in Nigeria’s economy. Analysts have noted that government borrowing dominates credit activities, which may be crowding out the private sector.
Afrinvest, a financial research firm, noted that the CBN faces challenges in balancing inflation control with economic growth stimulation. Recently, the Monetary Policy Committee of the CBN raised the monetary policy rate by 50 basis points to 27.25%, marking the fifth consecutive rate hike this year. Additionally, the cash reserve ratio for commercial banks was increased to 50%, while for merchant banks it was raised to 16%. These moves were aimed at curbing excess liquidity and stabilizing the exchange rate, but they also risk tightening liquidity in the private sector and increasing borrowing costs, which could stifle economic growth.
Moreover, Nigeria’s total public debt reached N121.67 trillion by June 2024, up 24.99% from N97.34 trillion recorded in December 2023. This figure includes both domestic and external debts owed by the Federal Government, the 36 state governments, and the Federal Capital Territory.
As the government continues to borrow heavily to meet its obligations, experts are calling for a more balanced approach to fiscal management. This includes stimulating private sector activities to ensure sustainable economic growth and reducing the reliance on excessive government borrowing.
