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Nigeria’s domestic credit hit a high record

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By Abdulwasiu Usman

Nigeria’s domestic credit currently sits at N61.1 trillion as of August 2022.

Since the beginning of the year, the country’s domestic credit has surged by 26%, rising to N25.7 trillion in addition to the initial alarming credit of N48.7 trillion. This is in accordance with data on the money supply in the nation obtained by Naira-metrics from the Central Bank of Nigeria (CBN). According to the data, net domestic credit to the government has been a major driver of domestic credit increase in the economy.

Total credit towards the economy represents all loans made to both the public and private sectors across a period, and it is crucial for determining the effect of the money supply on the economy. Over the last three years, the Nigerian economy has seen an exponential increase in credit as the Central Bank of Nigeria (CBN) implemented a high-lending monetary policy in the supposition that money lent to both the private and public sectors would stimulate the economy and enhance development in the country.

The public sector has high effects on the economy’s credit expansion.

However, rising living costs, high inflation rates, and rising interest rates posed challenges to reaching the aim. The central bank is more concerned with the performance of the private sector, since its growth estimates show greater potential for private enterprises, providing the central bank with some measures of success with its high-lending monetary policy. Despite this progress, credit expansion is now considered one of the key drivers of the country’s skyrocketing interest rate inflation, which has risen to more than 20%.

Notably, the public sector, which comprises state and federal government loans, has contributed more to the economy’s credit expansion, which has increased by a whopping N7.1 trillion out of a total of N12.4 trillion, representing 51% increase this year, far higher than the private sector effect. According to central bank data, over N21 trillion has been granted to the government as Ways and Means Provision, a clause that allows the government to borrow money from the central bank in an emergency to offset fiscal imbalances caused by delayed funds.

Oil and currency deterioration affects the country’s economy more.

This is mostly due to the substantial drop in government revenues experienced this year as a consequence of oil theft that ravaged the economy. Due to this, the CBN has been compelled to reconsider its strategy of expanding credit and instead has decided to increase rates in order to reduce inflation. Given that continuous expansion may have an impact on the CBN’s deflationary strategy aimed at controlling inflation. Nigeria hit a new high of 20.52% in August 2022, up from the previous month’s 19.64%. This marked the highest rate in Nigeria since September 2005.

The country’s inability to increase crude oil production despite the global oil rally, as well as the country’s currency’s continuous devaluation against the US dollar, has been recognized as significant issues influencing the country’s economy more than you could imagine. Nevertheless, the Central Bank of Nigeria (CBN) maintained intense pressure with an escalating inflation rate of 20.52%. The monetary policy committee, overseen by the central bank, boosted interest rates by 15.5% in an attempt to reduce inflationary pressures and keep prices stable.

Interest rates are projected to keep increasing.

To address rising inflation, the central bank adopted a hardline stance by increasing interest rates on savings deposits, which may drown out the money in circulation. The CBN mandated that banks pay at least 4.65% interest on savings deposit accounts, up from 4.2% before. This is due to monetary policy rates being raised by 150 basis points to 15.5% from 14%. Godwin Emefiele, CBN Governor remarked that interest rates would continue to increase in an effort to limit the amount of money in circulation and attract investors into the economy.


Related Link

CBN: Website



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Christiana
Christiana
1 year ago

The increasing cost of living, high inflation rates, and rising interest rates all presented obstacles in the way of accomplishing the goal.

Tolaniiii
Tolaniiii
1 year ago

The government bank has taken a hard line against growing inflation by raising interest rates on savings accounts, which could have the unintended consequence of reducing the amount of currency available for spending.

Hassan Isa
Hassan Isa
1 year ago

Credit expansion is currently considered to be one of the primary drivers of the ballooning interest rate inflation that has occurred in the country, which has increased to more than 20%.

Bola12
Bola12
1 year ago

Rates hampered progress. The central bank is more concerned with the private sector’s performance because its growth estimates show greater potential for private companies, indicating the success of its high-lending monetary policy.

Chibuzor
Chibuzor
1 year ago

The Central Bank of Nigeria (CBN) has pursued a high-lending monetary policy, which has resulted in an exponential increase in the amount of credit available to the Nigerian economy over the course of the last three years.

Adesanyaj72
Adesanyaj72
1 year ago

The expansion in domestic credit in the economy has been driven in large part by the increase in domestic net credit to the government.

Remi1
Remi1
1 year ago

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Last edited 1 year ago by Remi1
Abusi
Abusi
1 year ago

Actually our economy is nothing to write home about. Even our domestic credit is now ridiculously high. This is due to a lot of factors which has depleted our economy.

Haykaylyon26
Haykaylyon26
1 year ago

The increasing cost of living, high inflation rates, and rising interest rates are obstacles in other to achieve goal. And to manage rising inflation, the central bank adopted a hard-line stance by increasing interest rates on savings account

Taiwoo
Taiwoo
1 year ago

Every state should prioritize the development of necessary infrastructures and an environment that encourages the expansion of businesses as key foundations for future progress.

Godsewill Ifeanyi
Godsewill Ifeanyi
1 year ago

The rise in the amount of domestic net credit that is owed to the government has been a primary factor behind the expansion of domestic credit inside the economy.

Kazeem1
Kazeem1
1 year ago

Credit growth is now regarded one of the primary causes of the country’s rising, 20%-plus interest rate inflation.

Nwachukwu Kingsley
Nwachukwu Kingsley
1 year ago

In order to control the amount of money that is circulating and entice investors to put their money into the economy, it is likely that interest rates will continue to rise.

Adeolastan
Adeolastan
1 year ago

This is a very sad news but it is fact because the bad effect can be seen from the country economy and it has really affected 80% of households.

Tonerol10
Tonerol10
1 year ago

All this inflations, economy problems are cause by government. They are in charge of stealing and sharing of budget and borrowed money. We are watching them and their super stories talk

Iyanu12345ogg
Iyanu12345ogg
1 year ago

To address rising inflation the central bank has had increase interest rates on savings deposits. The interest rates would continue to increase in an effort to limit the amount of money in circulation and attract investors into the economy.

Ultra0711
Ultra0711
1 year ago

This issue needs full attention from the authorities cause our economy live line is lingering on it. The CBN should devise more measure to counter it.

DimOla
DimOla
1 year ago

The cost of living in Nigeria is becoming more and more expensive. Inflation is everywhere in Nigeria. The Federal Government are not taking necessary measures to reduce the effect of inflation at all. I hope everyone will not die of hunger in these country.

theApr
theApr
1 year ago

The central bank is more concerned with the performance of the private sector, since its growth estimates show greater potential for private enterprises, providing the central bank with some measures of success with its high-lending monetary policy.

Remi1
Remi1
1 year ago

The public sector, which comprises state and federal government loans, has contributed more to the economy’s credit expansion. The oil thefts has also significantly affected the economy