Nigeria’s total net credit from depository banks (DMBs) to the government increased by N4.94 trillion or 37.08% to N18.27 trillion in May 2022 from N13.33 trillion in December last year, according to the latest data released by the Central Bank of Nigeria. (CBN) shows.
The New Telegraph’s analysis of the apex bank’s ‘money and credit statistics’ indicates that bank lending to the government maintained an upward trend over the six-month period.
Specifically, the data shows that net credit to government increased from 13.33 trillion naira in December to 14.12 trillion naira and 14.72 trillion naira at the end of January and February 2022 respectively.
Further, it rose to N16.32 trillion and N17.11 trillion respectively in late March and April 2022 before reaching N18.27 trillion in May. Further analysis of the CBN’s “Money and Credit Statistics” for 2021 indicates that banks’ net credit to government jumped by 5.72 trillion naira or 45.55% to 18.27 trillion naira in May this year, compared to N12.55 trillion in the corresponding period last year. .
However, CBN data shows that bank lending to government has grown at a faster rate in the past five months compared to 2021 figures. For example, while it hit a record high of 13.33 trillion naira at the end of December 2021, credit to government continued to head north from the 14.12 trillion naira recorded at the end of January this year.
Indeed, in his personal statement to the Monetary Policy Committee (MPC) of the CBN held in March 2022, a member of the committee, Professor Festus Adenikinju, noted that the increase in public debt has a negative impact on revenues. and future economic growth. He said, “I am also concerned about the government’s growing share of total credit to the national economy. Credit to the government in February, when annualized, is well above the interim benchmark for 2022.
“Rising public debt is a constraint on future revenues and economic growth. I believe we need to signal to government the costs of deficit financing and continue to urge government to explore alternative financing mechanisms for infrastructure spending.
Analysts said the hike in the benchmark interest rate – the monetary policy rate (MPR) – by 150 basis points to 13% by the MPC at its May meeting, as part of measures to curb the surging inflation, is expected to deteriorate government finances as the country, which spent more than 90% of its income on interest payments to creditors last year, will now pay more to borrow from local investors.
Commenting on Nigeria’s Total Public Debt Data Report for the First Quarter of 2022, recently released by the Debt Management Office (DMO), which showed that the country’s total public debt increased by 5.2% or 2 trillion naira from 39.5 trillion naira at end-Dec ’21 to 41.6 trillion naira at end-Mar 22, with total domestic debt rising 5.4% q/q and 21.1% y/ has to reach 24.9 trillion naira by the end of March 22, analysts at Coronation Merchant Bank noted. that total domestic debt is currently 60% of Nigeria’s total public debt.
Analysts said: “Within domestic debt, Federal Government of Nigeria (FGN) instruments account for 80.6% of total domestic debt, while nationals represent 19.4 percent. Nigerian bonds and treasury bills (BNT) account for 92.6% of the FGN’s total domestic debt, while sukuk, treasury bills, savings bonds, green bonds and promissory notes of the FGN collectively contributed 7.4% of the total.
“Based on the DMO’s bond issuance schedules, the Debt Management Office forecast to raise a total volume of between N1.1trn and N1.2trn in the first half of 22. However, the DMO raised N1 .8trn in the first half. This is 50% higher than the upper limit set in the calendar for this period. In our view, the increased supply of FGN bonds should lead to higher yields across the curve.