Credit to Government Soars to N31.15tn Amid Local Borrowing Surge

Nume Ekeghe

Credit to the Nigerian government surged to an unprecedented N31.15 trillion in August 2024, highlighting the government’s increasing reliance on domestic borrowing to meet its financial obligations.

This sharp rise, representing a whooping N11 trillion increase from N19.83 trillion in July 2024, reflects the growing attractiveness of government securities in a high-interest-rate environment.

Data released by the Central Bank of Nigeria (CBN), underscores the government’s expanded borrowing strategy as it navigates fiscal pressures and limited revenue options.

The CBN’s latest money and credit statistics indicate a persistent upward trend in government borrowing throughout the year, driven largely by fiscal demands.

From August 2023, when government credit stood at N22.51 trillion, borrowing has seen significant fluctuations. While there was a moderate rise to N23.52 trillion in January 2024, a sharp surge occurred in February when credit reached N33.93 trillion, marking the highest spike during the year. However, borrowing patterns displayed volatility, with a notable dip to N19.59 trillion in March, followed by a modest rise in April to N19.98 trillion.

Following months, government credit resumed its upward trajectory, with May recording N28.38 trillion. Borrowing remained relatively stable over the next few months, hovering around N19.83 trillion in July before witnessing another substantial increase in August to N31.15 trillion.

The surge in government credit, analysts said, emphasises the government’s reliance on domestic credit markets as a primary funding source.

“The rise in government borrowing coincides with a broader economic environment where rising interest rates have made government securities increasingly attractive to investors seeking safer, higher-yielding assets.

“With inflationary pressures continuing to mount and borrowing costs rising, local investors have shown a strong appetite for government bonds, which offer relatively stable returns compared to other investment options, “analysts stated.