Commercial banks in Nigeria according to the latest report pruned its loan to its government by a whopping 73.18%, between February and March. As indicated by financial analysts, this has forced the government to look into the fixed-income market. In January, government credit totaled N23.52 trillion.
- Commercial banks in Nigeria reduced their loan to the government by 73.18% between February and March 2024
- Government turned to fixed-income market after the decrease in bank loans
- Economists suggested that the decline in credit to the public sector in March might be seasonal
A report seen in the Nigerian newspaper, The Punch revealed that Nigerian banks reduced their loan to the government in March 2024 by 73.18%, going from N33.93 trillion in February to N19.59tn in March, according to data from the country’s central bank.
Olusegun Ajibola, a professor of economics and dean of Caleb University's College of Postgraduate Studies in Imota, Lagos, and a former president of the Chartered Institute of Nigeria, disclosed to the aforementioned newspaper that the government borrowed less money from commercial lenders in March after raising a sizable sum from the fixed-income market through treasury bills and bonds.
“In March, there was a lot of government mobilization of funds through the issuance of Treasury bills. And it is cheaper for the government to raise funds through Treasury bills rather than borrowing from banks,” he said.
“Investors are also more interested in government securities. Foreign investors, who prefer the short end of the market, are interested in investing in government Treasury bills and short-term bonds. So, that provided an alternative borrowing channel for the government,” he added.
The professor deduced that the government would have to look for other sources to borrow from as the year progresses.
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Rotimi Fakayejo, a stockbroker and financial expert, gave his 2 cents on the subject, noting that the redemption of some government assets in March led to a notable decline in lending to the public sector.
While another economist, Dr Vincent Nwani, suggested that the decline was just for a time.
“The sharp decline in credit to the public sector between February and March 2024 was insignificant. The one-month sharp decline is not enough to determine a trend. We saw the credit to the government rise in January over December. We saw it rise in February over January. This one-month decline is too little to attach much meaning to it,” he said.
“I can just say it may be a seasonal thing. Maybe the government did a lot of auctions through the Debt Management Office, which is usually seasonal,” Dr Vincent Nwani added.
According to the DMO, the Nigerian Government sold bonds for N1.5 trillion during its auction in February.
