Banks’ credit to government (Cg) grew by 231.72 percent to N2.5 trillion at the end of June 2015 from N757.53 billion at end-December 2014, according to a report from the Central Bank of Nigeria (CBN).
It stood at negative of N236.09 billion when compared with end-June 2014 figure. The growth rate of credit to government at end-June 2015, when annualised, indicated an increase of 463.44 percent, which was well above the indicative growth target of 36.05 percent.
In effect, government sector moved from being a net creditor to the banking system to a net debtor, owing to a massive drop in revenues occasioned by the decline in crude oil prices in the international market.
The CBN’s Monetary Policy Rate (MPR) review released yesterday showed that credit to the private sector (Cp) increased by 4.32 percent to N18,897.31 billion at end-June 2015 from N18,115.21 billion at end-December 2014. Compared with the end-June 2014 figure of N16,925.58 billion, Cp rose by 8.31 percent. The growth rate of Cp at end-June 2015, when annualised, indicated an increase of 8.64 percent, which was below the indicative growth target of 26.06 percent for 2015.
According to the report, the Nigerian financial environment was shaped largely by global economic developments, notably: the weak commodity market, particularly the continued decline in crude oil prices, heightened risks in the Euro area following the Greek debt crisis, and continued slowdown in China.
However, there were significant developments in the money market, which reflected active transactions in CBN bills and government securities in the first half of 2015. The observable fluctuations in banking system liquidity in the later part of the period under review reflected the relative volatility in money market interest rates.
Market activities along with substantial demand pressure in the foreign exchange market were impacted, notably by the fluctuations in banking system liquidity.
Godwin Emefiele, CBN governor, said with foreign reserve at critically low levels, bold and innovative measures were taken to curtail speculative activities in the market, stem the depreciation of the naira and prevent emergence of a multiple exchange rate regime.
