The Central Bank of Nigeria (CBN) has reported a significant decline in credit extended to the government, which fell to N24.52 trillion in January 2025.
According to the latest data from the CBN’s Money and Credit Statistics, this represents a substantial decline from the N39.62 trillion recorded in November 2024 and N39.4 trillion in October 2024.
The data further shows that September 2024 recorded N39.7 trillion while August 2024 stood at N31.2 trillion.
The downward trend in government credit is reflective of ongoing fiscal measures aimed at curbing excess borrowing and maintaining economic stability.
A comparison with previous months shows significant volatility in government credit, with July 2024 recording N19.8 trillion and June 2024 standing at N23.9 trillion.
Year-on-Year Comparison
On a year-on-year basis, credit to the government in January 2025 (N24.52 trillion) is slightly higher than the N23.52 trillion recorded in January 2024, indicating a modest increase in government borrowing over the past year. However, the fluctuations observed throughout 2024 suggest that borrowing patterns have been influenced by economic reforms and central bank interventions.
Why the decline?
Economic analysts suggest that the sharp drop in credit to the government could be attributed to:
- Tighter monetary policy: The CBN has been implementing measures to reduce excess liquidity in the system, which may have led to reduced government borrowing. According to Dr. Adam Abudu of the Society for Peacebuilding and Economic Advancement, recent CBN tightening policies do not provide incentives to borrow. Nairametrics reports that yields on Nigerian Treasury Bills dropped significantly in the February auction which saw lower stop rates across all tenors despite strong demand, signaling a shift in investor expectations.
The CBN recorded total subscriptions of N2.41 trillion, lower than the N3.22 trillion from the previous auction.
- Fiscal discipline: The government may have adopted a more conservative approach to borrowing in a bid to manage debt levels effectively. When asked whether the federal government is considering another Eurobond sale, finance minister Wale Edun confirmed that it remains a viable option to address the country’s deficit spending.
“If you look at our budget presentation, which is currently going through the National Assembly, one thing you will notice is there is some deficit spending,” he explained.
However, he stressed that any funding required to cover the deficit will not be managed through the “printing of money,” a practice that contributed to economic instability in the past. Instead, the government intends to raise funds by accessing financial markets on “reasonable terms.”
- Revenue generation efforts: Increased efforts to boost internally generated revenue (IGR) and attract foreign investments may have reduced reliance on credit financing.
With the government emphasizing fiscal prudence and debt sustainability, credit to the government may continue to fluctuate based on revenue performance and economic policies. Analysts predict that if revenue streams remain strong, reliance on credit could decrease further, ensuring macroeconomic stability.
Highlights:
- Credit to the government declined to N24.52 trillion in January 2025, marking a significant drop from the previous month.
- The Central Bank of Nigeria (CBN) data indicates a sharp reduction from N39.62 trillion recorded in November 2024.
- Analysts attribute the decline to fiscal adjustments and tightening monetary policies.
