In February 2024, the financial sector’s credit to the economy witnessed a notable increase, rising by two percent to N114.7 trillion compared to N112.4 trillion in January 2024.
Detailed insights from the Money and Credit Statistics report released by the Central Bank of Nigeria (CBN) indicate a six percent month-on-month surge in banks’ credit to the private sector, reaching N80.8 trillion in February from N76.2 trillion in January.
However, the report also highlights a 6.3 percent decline in credit to the government, falling to N33.9 trillion in February from N36.17 trillion in January.
Despite this decrease in government credit, recent data from the Debt Management Office (DMO) shows a significant rise in public debt, reaching N97 trillion in the fourth quarter of 2023 (Q4’23), marking a 10 percent increase from N87.8 trillion in Q3’24. The surge is attributed to new domestic borrowing by the Federal Government to address the deficit in the 2024 Appropriation Act, as well as disbursements from multilateral and bilateral lenders.
However, analysts at Cowry Asset Management Limited have raised concerns about the fiscal challenges faced by state governments, citing low revenue amid escalating expenditure and debt servicing obligations. They highlight the strain on available funds, particularly in addressing the country’s rising cost of living and fiscal pressures.
Looking ahead, while there may be an uptick in gross federally collected revenue due to the continuous depreciation of the naira, both the Federal Government and state governments are expected to grapple with significant fiscal constraints, characterized by burgeoning expenditure profiles and the weighty burden of servicing existing debts.
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