Govt Borrowing from Banks Surges by 90% in 12 months, Reaching N42trn

Samuel Mobolaji

Government borrowing from Nigerian banks has surged by nearly 90 per cent in the past year, as Federal Account Allocation Committee (FAAC) disbursements across government tiers continue to rise.

The Central Bank of Nigeria (CBN) data reveals that loans to the government hit a record N42.02 trillion in September 2024, up from N22.14 trillion in September 2023, marking a significant reliance on local banks for deficit financing.

In its latest report, the CBN also noted a substantial 27.5 per cent annual increase in private sector credit, which reached N75.85 trillion in September, compared to N59.51 trillion in the same period last year.

Analysts at Cordros Capital Limited attribute this growth in private sector credit to the CBN’s enforcement of a 50 per cent loan-to-deposit ratio, as well as the effects of naira depreciation on banks’ foreign-denominated assets.

Private sector loans rose 1.7 per cent month-on-month in September, reversing a previous one per cent decline in August. This trend aligns with the overall expansion of Nigeria’s money supply, as the CBN drives economic growth while managing liquidity levels.

Broad money supply (M3) expanded by 62.8 per cent year-on-year to reach N108.95 trillion, driven by gains in both quasi-money (up 79.6%) and narrow money supply (up 40.4%).

Additionally, currency in circulation surged 56.1% over the year to N4.31 trillion, up from N2.76 trillion in September 2023.

Looking ahead, analysts forecast continued double-digit growth in private sector credit through 2024, buoyed by the CBN’s strict loan-to-deposit ratio guidelines for deposit money banks (DMBs), which encourage commercial banks to pursue lending activities.

However, monetary policy tightening may temper the pace of credit expansion in the private sector.

As government borrowing reaches unprecedented levels, the trend underscores Nigeria’s ongoing dependency on domestic financing following the discontinuation of CBN’s ways and means funding options. This shift places additional pressure on banks, which face competing demands from both the government and private sector amid tightening economic conditions.