•Debt burden to worsen — FSDH
By Elizabeth Adegbesan
Credit to the government rose by N2.5 trillion or 17.7 per cent to N16.6 trillion as at April 2022 from N14.1 trillion as at January, 2022.
This is contained in the latest Central Bank of Nigeria (CBN) Money and Credit data for April 2022, which showed that credit to the government rose steadily in the four-month period, rising from N14.1 trillion in January 2022 to N14.7 trillion in February, and to N16.3 trillion in March before advancing to N16.6 trillion in April 2022.
The data showed that the banks’ public sector credit dominated their assets distribution, representing 30.9 percent of the N53.7 trillion total credit assets of the banks during the period.
According to the CBN, credit to the private sector rose during the period by N1.93 trillion or 5.5 per cent to N37.13 trillion in April 2022 from N35.2 trillion in January 2022.
Meanwhile, the total credit allocation rose by N4.5 trillion or 9.14 per cent to N53.7 trillion in April 2022 from N49.2 trillion in January 2022.
In the CBN Communique No. 141 of the Monetary Policy Committee, CBN, a statement from a member of the Committee, Adenikinju Festus, noted that the rise in public debt is a constraint on future income and economic growth.
He 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 annualized 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 alternative financing mechanisms for infrastructural spending.”
In their Macroeconomic review and outlook for April 2022, analysts at FSDH Merchant Bank projected further rise in government debt stock this year, saying: “Budget deficit is expected to increase to N7.4 trillion in 2022, following a lower revenue projection and a higher expenditure outlay. The reduction in revenue is partly due to the increased provision for fuel subsidy, which was hiked from N0.44 trillion to N4 trillion.
“This suggests that Nigeria may not benefit from the increase in crude oil price due to the high cost of subsidy/petrol imports, which will pressure government finances and the exchange rate.
“With this, we expect government borrowing as well as Nigeria’s total debt stock to trend upwards in 2022.”