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Banking credit to public sector grows 35% to N17.9 trln in H1 2022, says CBN report

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The banking sector credit to the government rose by 35 per cent in the first six months of this year, the Central Bank of Nigeria (CBN) stated in its latest Money and Credit Statistics for June 2022.

The report showed that credit to the government rose to N17.9 trillion at the end of June 2022 from N13.3 trillion at the end of December 2021.

The report also showed that the 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.

It said banking sector credit to the private sector of the economy grew 11 per cent to N39.3 trillion in six month to June 2022, from N35.2 trillion as of December 2021.

Also, the report stated that 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.

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Analysts have expressed great concern about the rising government debt when compared to its revenue,  projecting a higher debt service to revenue ratio this year.

In its H1’22 Macroeconomic 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 per cent 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 per cent 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.”

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