FG’s borrowing soar on high interest rates

Omeiza Bilal

The Central Bank of Nigeria’s (CBN) has disclosed that credit to the Federal Government soared by over N11 trillion in August 2024.

 According to the Apex Bank in its latest money and credit statistics, the increase was driven by attractive yields on government securities amidst persistent interest rate hikes.

According to the report, government borrowing now accounts for 29.4 per cent of N105.88 trillion in net domestic credit, thus marking a significant shift in credit allocation toward public debt.

This surge reflects the growing reliance on domestic debt to fund public expenditures as businesses face rising borrowing costs, the report further notes.

Rising interest rates have made government securities more attractive to investors, as higher yields offer better returns with relatively lower risk compared to private sector lending.

In August, government credit reached N31.15 trillion, a 57.1 per cent increase from July’s N19.83 trillion. Compared to August 2023, borrowing has risen by 38.5 per cent, underscoring the government’s increasing dependency on debt financing amid economic pressures.

In contrast, private sector credit declined slightly to N74.73 trillion, as businesses cut back on borrowing due to high interest rates that have escalated debt repayment costs.