Govt. borrowing from banks increase by 4% in 4Q
Government borrowing from commercial banks in the country has been on the rise in recent times with an over 3.8 percent increase in lending in the 4th quarter of 2015.
Records from the Central Bank of Nigeria reveal that a total credit of N2.89trillion was received by the federal government from the banking sector in the period, thereby increasing the banks’ holding of government securities to 18.7 percent.
The increased borrowing which many attributed to the economic challenge facing the country is part of measures to meet up with operational expenses due to the continued drop in the price of crude oil in the global market.
CBN, in its Economic Report for the fourth quarter of 2015, stated that the increase in lending by banks to the Federal Government was attributed to an 18.7 percent rise in Deposit Money Banks’ holding of government securities within the period.
“Banking system’s credit (net) to the Federal Government, quarter-on-quarter, rose by 3.8 percent to N2.89tn, compared with the growth of 11.0 percent at the end of the preceding quarter.
“The development reflected the 18.7 percent rise in the DMBs’ holding of government securities. Over the level at end-December 2014, the banking system credit (net) to the Federal Government grew by 151.6 percent, compared with the growth of 142.4 percent at the end of the preceding quarter.”
The harsh economic condition is already taking its toll on the nations’ Excess Crude Account, ECA, which has since dropped to about $2.3billion.
The Governor’s Forum last week asked for funds from the depleting ECA to enable them meet up with responsibilities in their various states, this is sequel to the federal government’s decision to defer repayment on its bailout to 27 states that were unable to pay workers’ salaries.
Allocations to the three tiers of government for March 2016, further captures the strain in government revenue, with a shortfall of about 300billion due to drop in revenue generated.
The CBN report further shows that federal government’ recorded a fiscal deficit of N289.1bn in its operations in the fourth quarter of 2015. The fiscal deficit for the fourth quarter was N158.4bn higher than the N130.7bn recorded in the third quarter of last year.
The report stated that the Federal Government could not generate enough revenue to finance its expenditure as a result of some economic challenges.
According to the report, while a total sum of N818.4bn was generated as revenue by the Federal Government in the fourth quarter of 2015, about N1.1tn was spent to finance various programmes.
A breakdown of the total expenditure showed that the recurrent component accounted for 59.6 percent or N655bn, while capital and statutory transfer components accounted for 31.8 or N349.8bn and 8.6 percent or N94.6bn, respectively.
A further breakdown of the recurrent expenditure showed that the non-debt expenditure component accounted for 65.7 percent or N430.3bn, while debt service payments accounted for the balance of N224.6bn or 34.3 percent.
The report read in part, “At N1.10tn, provisional data showed that the Federal Government’s expenditure for the fourth quarter of 2015 was lower than both the provisional quarterly budget estimate and the level in the preceding quarter by 6.9 and 5.8 percent, respectively.”
“The development, relative to the quarterly budget estimate, was attributed mainly to the rise in capital expenditure.