As of August 2022, Nigeria’s domestic credit was worth N61.1 trillion, which is the highest credit level ever recorded in the nation.
Since the beginning of the year, domestic credit has grown by 26%, adding an additional N12.4 trillion to the already alarming N48.7 trillion reported at the start of the year.
The Nigerian government has been increasing its debt over the past three years, driven by the desire to boost the country’s economy. The Nigerian government is confident that the funds it borrows both domestically and internationally can be applied to accelerating the development that the nation so urgently needs.
High inflation rates, rising living expenses, and rising interest rates, however, would seem to indicate otherwise.
The Central Bank of Nigeria (CBN) decided on a high-lending monetary policy with the belief that the money lent to both the private and public sectors would strengthen the economy, which led to an exponential increase in the Nigerian economy’s credit.
However, because its growth projections showed more promise with private businesses, the apex bank is more interested in the performance of the private sector.
Fortunately, the private sector is still growing, which helps the apex bank’s high-lending monetary policy to some extent.
Regardless, the country’s current inflation and interest rate are attributed largely to credit expansion.
It’s also interesting to note that this year’s N12.4 trillion increase in total credit to the economy was driven by the public sector. Simply put, despite the better-performing private sector, the public sector contributed more to the rising domestic credit than it did.
This year alone, the public sector credit, which includes borrowings from the federal and state governments, increased by a whopping N7.1 trillion, or 51%.
