Government credit hits a one-year low despite increased interest rates.
Despite higher interest rates on government securities, commercial banks’ credit to the government fell to a one-year low in the first quarter of 2024. This decline, along with a decrease in credit to the whole economy, was attributed to the Central Bank of Nigeria’s contractionary measures. Banks also reduced lending to the private sector. The tightening measures aimed to curb inflation, which rose to 33.2 percent in March 2024. However, they have impacted Nigerians’ purchasing power and tax payments. Additionally, banks are favoring treasury securities over direct lending due to attractive yields. The IMF has suggested increasing Open Market Operations bills to address excess liquidity. The recent securitization of the remaining Ways and Means debt balances aims to improve debt sustainability.
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