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Despite the Central Bank of Nigeria’s (CBN) tight monetary policy, Nigerian banks and discount houses borrowed a staggering ₦29.017 trillion through the Standing Lending Facility (SLF) in the third quarter of 2024. This marked a significant 368.8% increase compared to the ₦6.24 trillion borrowed during the same period in 2023, according to the CBN’s financial report.
The report also highlighted a surge in deposits by banks and discount houses, which amounted to ₦14.97 trillion in Q3 2024, a 522.12% jump from the ₦2.41 trillion recorded during the same quarter of 2023. This spike occurred despite a liquidity crunch reported in April 2024, attributed to the CBN’s continued tightening of monetary policy.
The report traced a substantial portion of the borrowed funds to credit extended to the Nigerian government. Government borrowing reached an unprecedented ₦31.15 trillion in Q3 2024, reflecting a 40.7% increase compared to ₦22.14 trillion in Q3 2023. This surge underscores the government’s growing reliance on domestic borrowing to meet fiscal obligations amid limited revenue streams.
Credit to the private sector also showed strong growth, rising to ₦74.73 trillion in Q3 2024—a 25.55% increase from the ₦59.51 trillion recorded in Q3 2023. This uptick demonstrates ongoing demand for credit by businesses, despite the economic challenges posed by high inflation and rising operational costs.
The CBN’s data revealed a persistent upward trend in government borrowing throughout 2024. From July to August alone, credit to the government jumped by ₦11 trillion—from ₦19.83 trillion to ₦31.15 trillion—highlighting the appeal of government securities in an environment characterized by high-interest rates.
However, private sector borrowing showed a slight decline in August 2024, dipping to ₦74.73 trillion from ₦75.51 trillion in July, representing a 1.03% decrease. This moderation in private sector credit may signal caution among businesses grappling with the effects of rising interest rates.
The Monetary Policy Rate (MPR), which was 18.75% in Q3 2023, rose to 26.75% in Q3 2024, as part of the CBN’s effort to curb inflation. Despite these high rates, borrowing levels remain elevated, particularly in the private sector. This trend suggests that businesses are still expecting inflation to persist and are borrowing to cover operational costs—an approach that may prove unsustainable in the long run.
While the government continues to borrow heavily to address fiscal challenges, the rising debt-servicing ratio poses a significant concern. The growing burden of debt repayments is likely to strain the government’s finances, adding to the fiscal pressures the country is already facing.
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