Banking Sector Credit To Government Hits N17.9 Trillion

According to the Money and Credit Statistics for June 2022 released by the Central Bank of Nigeria, the banking sector credit to the government shot up by 35 per cent in the first half of 2022 (H1 ’22), which shows that credit to the government rose to N17.9 trillion at the end of June 2022 from N13.3 trillion at the end of December 2021

The data also indicated that the growth rate in banking sector credit to the government was faster than private sector credit, though the absolute volume of private sector credit remains higher.

Credit to the private sector grew by 11 per cent from N35.2 trillion as of December 2021 to N39.3 trillion in H1'22.

Meanwhile, net credit to the economy grew by 29% in H1'22 from N44.2 trillion at the end of December 2021 to N57.2 trillion at the end of June 2022. 

Analysts have shown great concern about the increasing government debt when compared to its revenue, projecting a higher debt service to revenue ratio this year.

In its H1’22 Macroeconomic outlook, analysts at CardinalStone research said: “In the face of expensive subsidy payments, low revenue mobilization has inadvertently resulted in rapid growth in public debt. 

"Despite these growing debt concerns, Nigeria’s debt-to-gross Domestic Product (GDP) is still considered sustainable.

"Precisely, it is below the 70 per cent MAC-DSA3 benchmark and close to the 40 per cent-58 per cent identified as safe and growth-supporting for lower-middle-income countries with weak revenue mobilisation. 

“Notwithstanding the perceived debt sustainability, interest expense pressure remains a burden on federally generated revenue. 

"Specifically, 85 per cent of FGN’s retained revenue in the last 3 years was channelled towards debt servicing. 

“In 2022, we believe the burgeoning debts, amidst weaker revenues, will likely drive debt service to revenue ratio above 90 per cent.”