While ordinary citizens in Nigeria are facing harse inflation realities, the government is seeing a rise in its borrowing from banks to a record ₦42 trillion in September 2024.
They say the 90% increase is as a result of rising money supply.
The surge underscores growing reliance on bank financing, with potential ripple effects across the economy.
In September 2024, Nigeria’s financial landscape shifted dramatically, as government borrowing from banks soared to a record ₦42 trillion, propelled by a growing money supply now at ₦109 trillion.
This sharp increase, nearly doubling last year’s figures, highlights the government’s rising dependence on bank credit to fund essential projects and manage fiscal pressures.
Moreover, the trend in borrowing has become more pronounced month by month.
From August to September, government credit jumped nearly 35%, indicating a consistent demand for funding that places additional strain on the financial sector.
Much of this support has come from the issuance of government bonds, as banks increasingly back government initiatives, contributing to the national debt.
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However, this shift poses potential challenges.
When banks prioritise lending to the government, less financing may be available for private businesses, a phenomenon known as “crowding out.”
While private sector credit did grow by over 27% to reach ₦75.84 trillion, there are concerns that ongoing government borrowing could limit funds for business growth and impact economic expansion.
In tandem with rising government credit, currency circulation surged.
In September, the amount of currency in circulation rose to ₦4.31 trillion, while cash held outside banks climbed to ₦4.02 trillion, signalling shifts in public spending habits and suggesting a growing reliance on cash within the economy.
