Banks Loan to Govt. Hits Record High, Up 90% in 12-Month
Despite a significant spike in Federal Account Allocation Committee (FAAC) disbursement among tiers of government, the authority has also ramped up borrowings from banks.
Total loans taken by companies, Nigerian government other economic increased significantly year on year, according to central bank data, with government borrowing, driving the momentum relatively
The Apex Bank said in a recent report that credit to the Private Sector increased by 27.5% year on year to N75.85 trillion in September from N59.51 trillion in the comparable period in 2023.
Analysts at Cordros Capital Limited believe the continuous increase in private sector credits reflects the impact of CBN’s enforcement of the 50.0% loan-to-deposit ratio. The surge also mirrored the spillover effects of the naira depreciation on foreign-denominated assets of the local banks.
On a month-on-month basis, private sector’s credit rose by 1.7% to N74.73 trillion in September, reversing a 1% month-on-month decline in August Credit to the government also surged to a record high of N42.02 trillion in September, representing an 89.8% year-on-year increase relative to the N22.14 trillion in September 2023.
Analysts said this indicates increased reliance on domestic banks for deficit financing in the period after the authority halted borrowings via CBN ways and means options.
The CBN report showed that money supply increased as the drive to grow the local economy took front burner while the apex bank continued to curtail excess liquidity. Broad money supply (M3) expanded by 62.8% year on year to N108.95 trillion amid increases across quasi-money and narrow money supply.
Data review revealed that quasi-money increased by 79.6% over 12 months while the narrow money supply surged by 40.4% over the same period. The currency in circulation rose by 56.1% year on year to N4.31 trillion from N2.76 trillion in September 2023.
Analysts project that the private sector credit will maintain a double-digit expansion in 2024.
The expectation is anchored on re-enforcement of the CBN’s limit on the loans-to-deposits macro-prudential ratio for deposit money banks (DMBs), which will continue to drive the willingness of commercial banks to create risky assets.
Nonetheless, analysts at Cordros Capital Limited acknowledge that the increased monetary policy tightening measures may tether credit to private sector growth. #Banks Loan to Government Hits Record High, Up 90% in 12-Month FX Stability: CBN Sells 122.671m Dollars to 46 Authorised Dealers
