The Central Bank of Nigeria’s data reveals a significant increase in credit to the government, which grew by nearly 90%, from N22.14 trillion in September 2023 to N42.02 trillion in September 2024.
This growth has outpaced credit expansion to the private sector
This is according to the Money and Credit Statistics data obtained from the CBN’s website.
Credit to the private sector also experienced growth, increasing by 27.46%, from N59.51 trillion in September 2023 to N75.85 trillion in September 2024.
While this growth is notable, it is much slower compared to the sharp 89.79% rise in credit to the government, highlighting a divergence in the allocation of financial resources between the government and the private sector.
Credit to the private sector from banks includes loans, trade credits, and other account receivables and supports provided by banks to the private sector within a period. Government credit comprises credit facilities extended to the government.
The sustained hikes in the benchmark interest rate by the CBN’s Monetary Policy Committee, which raised the MPR by over 800 basis points to 27.50% from 18.75% in December 2023, have significantly squeezed credit to the private sector. This has led to higher borrowing costs for businesses, slowing their access to financing.
Meanwhile, credit to the government has shown a more volatile trend, fluctuating between dips and upswings.
While it generally remained below N30 trillion, there was a sharp increase in the third quarter, with credit rising from N19.83 trillion in July to N31.15 trillion in August, and then surging to N42.02 trillion in September.
There may be even more constriction in the flow of credit to the private sector in the coming year as the Governor of the CBN, Olayemi Cardoso, has maintained the apex bank would maintain its hawkish stance to tackle inflation.
Commenting at the annual Bankers’ Dinner of the Chartered Institute of Bankers of Nigeria in November, Cardoso said, “Our foremost priority is to achieve price stability, with inflation as a central focus. While inflation has shown early signs of moderation, we are fully committed to doing everything in our power to tame inflationary pressures in 2025. To this end, we will maintain vigilance through the strategic deployment of our monetary policy tools.
“The monetary policy rate will continue to serve as our anchor for inflation management, calibrated on evolving economic conditions and data. The cash reserve ratio and open market operations will be adjusted as necessary to ensure liquidity levels in the banking system remain aligned with our inflationary goals.”
