Government credit increased by 2.0 percent month-on-month (MoM) to N19.98 trillion in April, up from N19.58 trillion in March, according to the Central Bank of Nigeria (CBN) Money and Credit Statistics for April. The data revealed a mixed trend in government credit since January, when it was at N23.5 trillion. It grew to N33.92 trillion in February, dropped to N19.58 trillion in March, and then rose to N19.98 trillion in April.

The statistics also indicated a 2.4 percent MoM increase in credit to the private sector, reaching N72.9 trillion in April, up from N71.2 trillion in March. Consequently, net domestic credit rose by 2.31 percent MoM to N92.9 trillion in April from N90.8 trillion in March.

Analysts at Cowry Asset Management Limited attributed the March decline in government credit to the CBN’s policy rate hike. In their weekly financial market review and outlook, they stated: “This could be linked to the effect of the policy rate hike by the monetary authority on the economy, where the CBN’s Monetary Policy Committee (MPC) has raised the interest rate by 600 basis points to 24.75 percent so far in 2024 from 18.75 percent, aiming for price stability. The full impact of the policy rate hike by the central bank will continue to be felt in the economy as borrowing costs rise and businesses seek alternative funding options in the local debt market through the issuance of commercial papers for the short term to sustain operations.”

However, the April increase in government credit contradicts analysts’ predictions of a continued decline. “While we anticipate slow growth in total credit to the government and private sector, businesses will continue to explore further funding options amid rising prices. We also expect the federal government to seek various funding options with lower debt servicing requirements to meet its project funding and investment obligations,” projected analysts at Cowry Asset.