Credit to govt rises faster than private sector

Forum 1 year ago

Credit to govt rises faster than private sector

Financial sector credit to the government rose month-on-month (MoM) by eight percent to N26.6 trillion in January 2023 from N24.6 trillion in December 2022.

But credit to the private sector rose Year-on-Year (YoY) by a marginal 0.95 percent to N42.2 trillion in January 2023 from N41.8 trillion in December 2022.

Data from the Central Bank of Nigeria (CBN) Money and Credit statistics showed that the credit to the private sector and the government resulted in a net domestic credit of N68.9 trillion in January 2023.

This represents a 3.76 percent MoM increase when compared to N66.4 trillion in December 2022.

Though the rising domestic credit is expected to support economic growth, financial analysts are hinting that it may also add to inflationary pressures at the backdrop of the current cash crunch in the economy.

Analysts at Cowry Asset Management Plc have projected further rise in the inflation rate to 22.15 percent this month from 21.82 percent in January due to naira crunch and other factors.

“However, the planting season and currency pressure from the naira crunch due to the CBN currency redesign policy on the transition to cashless policy coupled with other forms of election spending are likely to propel another cycle of price increase in February.

“In light of the above, we project a further uptrend in inflation to 22.15 in February 2023.”