Credit to the government increased by 2.0 percent month on month (MoM) to N19.98 trillion in April from N19.58 trillion in March. The Central Bank of Nigeria’s (CBN) Money and Credit Statistics for April revealed a mixed trend in credit to the government since January, when it stood at N23.5 trillion. According to the CBN, credit to the government increased to N33.92 trillion in February, dropped to N19.58 trillion in March, and then increased to N19.98 trillion in April.
Credit to the private sector increased by 2.4 percent month on month to N72.9 trillion in April, up from N71.2 trillion in March. As a result, net domestic credit increased by 2.31 percent month on month to N92.9 trillion in April, up from N90.8 trillion in March.
Cowry Asset Management Limited analysts linked the government’s credit reduction in March to the CBN’s policy rate hike. In the company’s weekly financial market review and outlook, they stated: “This could be linked to the effect of the monetary authority’s policy rate hike on the economy, where the CBN’s Monetary Policy Committee (MPC) has raised interest rates by 600 basis points to 24.75 percent so far in 2024 from 18.75 percent just to achieve price stability.
“The full impact of the policy rate hike by the central bank will continue to be seen in the economy as borrowing costs trend higher while businesses seek alternative funding options in the local debt market through the issuance and raise of commercial papers for the short term in order to keep business operations afloat.” However, the growth in government lending in April contradicts economists’ predictions of a steady decline.
Government
“While we believe that overall credit to the government and private sector will continue to grow slowly, firms will seek more funding options as prices rise. On the other hand, Cowry Asset analysts predict that the federal government will continue to explore various funding solutions with lower debt payment costs in order to achieve its project funding and investment obligations.
Source: vanguardngr.com
