Tony Chukwunyem 
Financial institutions’ total loans to government rose by N1.99trillion or 8.07 per cent to N26.65trillion as at January 2023, from N24.66trillion in December last year, latest Central Bank of Nigeria (CBN) data shows. This is in line with the trend of consistent growth in net credit to the government recorded for last year.
Indeed, New Telegraph’s analysis of updated “Money and credit statistics,” recently released by the apex bank, indicates that a drop in net credit to the government was recorded in only two months throughout 2022. Specifically, the CBN’s data shows that net credit to the government rose from N13.84 trillion in December 2021 to N14.90trillion at the end of January 2022, but dropped to N14.72trillion in February 2022.
It, however, increased to N16.32trilion and N16.85trillion in March and April respectively, maintaining an upward trend to hit N22.83trillion in September, before falling to N22.65trillion and N22.64trillion in October and November 2022, respectively. Further analysis of the data indicates that compared with 2021 when bank loans to the government did not exceed the N13.84trillion peak recorded for December that year, credit to government in 2022 increased at a faster pace. This has led to some financial experts warning that the surge in credit to the government is crowding out the private sector.
In a recent report, analysts at FBNQuest Research noted that net credit to the Federal Government was constantly exceeding all other monetary aggregates that they track. Citing the rising fiscal deficit, they thus predicted that domestic borrowing by the government would continue to crowd out the private sector. Similarly, citing CBN data, the analysts pointed out that although credit extension to the private sector maintained an uptrend in recent months, it is still surpassed by credit extension to the government. The analysts said: “The latest data for October shows that credit extension to the government expanded by 75 per cent y/y, following a 76 per cent growth in September. According to reports, the CBN’s loans to the Federal Government via ways and means amounted to N23.8 trillion as at end-October 2022. “As a result, we can conclude that the government’s access to credit is crowding out lending to the private sector. “The high rate of credit extension to the government is likely to continue, due to the increasing government’s fiscal deficits. The 2023 (approved budget) implies a fiscal deficit of c.N11.0 trillion, which is higher than the revised N8.2 trillion in the 2022 budget,” said the reports. New Telegraph reports that in his personal statement at the CBN’s Monetary Policy Committee (MPC) held in March last year, a member of the committee, Professor Festus Adenikinju, had stated: “I am also concerned about the rising share of the government in total credit to the domestic economy. Credit to the government in February when annualised is far above the provisional benchmark for 2022. “The rise in public debt is a constraint on future income and economic growth. I believe that we must signal to the government the costs of deficit financing and continue to prod the government to explore al-ternative financing mechanisms for infrastructural spending.” Given that MPC members at their first meeting of 2023, held in January, voted to raise the benchmark interest rate- Monetary Policy Rate (MPR) from 16.5 per cent to 17.5 per cent -(the fifth consecutive increase of the rate), as part of measures to rein in inflation, analysts predict that government’s borrowing costs are likely to continue to rise to record levels. In the latest edition of its Nigeria Development Update (NDU) report, for instance, the Word Bank projected that interest payments on the FG’s borrowing from the CBN will gulp over 62 per cent of revenue by 2027. The bank said interest payments on such advances would increase by 2.4 percentage points of the Gross Domestic Product (GDP) between 2018 and 2027. It warned that financing of the fiscal deficit through Ways and Means was fueling inflation, noting that at least five million Nigerians were pushed into poverty as a result of rising inflation between January and September 2022.
