The Money and Credit Statistics for June 2022, which was released by the Central Bank of Nigeria, showed that credit to the government rose to N17.9 trillion, representing a 35 per cent rise in the first half of 2022 (H1 ’22).
The data also indicated that growth rate in banking sector credit to the government was faster than private sector credit, though the absolute volume of private sector credit remains higher.
At N39.3 trillion in the H1’22 credit to the private sector grew by 11 percent from N35.2 trillion as at December 2021.
Meanwhile, net credit to the economy rose to N57.2 trillion at the end of June 2022 from N44.2 trillion at the end of December 2021, representing 29 per cent growth in H1’22.
Analysts have expressed great concern on the rising government debt when compared to its revenue, projecting a higher debt service to revenue ratio this year. In its H1’22 Macro-economic outlook, analysts at CardinalStone research said: “In the face of expensive subsidy payments, low revenue mobilization has inadvertently resulted in rapid growth in public debt.
“Despite these growing debt concerns, Nigeria’s debt-to-Gross Domestic Product (GDP) is still considered sustainable. Precisely, it is below the 70 percent MAC-DSA3 benchmark and close to the 40 per cent-58 per cent identified as safe and growth-supporting for lower-middle -income countries with weak revenue mobilisation.
“Notwithstanding the perceived debt sustainability, interest expense pressure remains a burden on federally generated revenue.
“Specifically, 85 percent of FGN’s retained revenue in the last 3 years was channelled towards debt servicing.
“In 2022, we believe the burgeoning debts, amidst weaker revenues, will likely drive debt service to revenue ratio above 90 per cent.”
