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Nigeria’s Net Domestic Credit Hits Record of N61.1 Trillion in August 2022

The total net domestic credit of Nigeria’s economy rose to N61.1 trillion in August, the highest the economy has ever recorded

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Naira Exchange Rates - Investors King

The total net domestic credit of Nigeria’s economy rose to N61.1 trillion in August, the highest the economy has ever recorded, according to the data retrieved from the Central Bank of Nigeria (CBN) on the money supply in the country.

Net domestic credit signifies the local loans given to both the public and private sectors in the country over a certain period. 

In December 2021, Nigeria recorded a net domestic credit of N48.7 trillion. However, by August 2022 total domestic credit had risen to N61.1 trillion, representing an increase of N12.4 trillion or 26% when compared to N48.7 trillion achieved in December 2021.

Further analysis of the data by Investors King shows that the private sector has the highest domestic credit rate of N40.1 trillion, 66% of the total credit to the economy. While the public sector has a domestic credit of N21 trillion.

However, a more critical analysis of the available data revealed that the N12.4 trillion increase recorded between December 2021 to August 2022 was majorly from the public sector domestic credit.

The public sector domestic credit includes borrowings from the state and Federal Government which totaled to a sum of N7.1 trillion this year alone.

Nigeria has been struggling with limited fiscal space following the decline in its crude oil production due to oil theft and a series of other factors. Foreign revenue generation dropped across the board as the nation dropped to fourth on Africa’s largest producers‘ list in September 2022.

Therefore, the country’s inability to up crude oil production despite the global oil rally has affected the economy more than the obvious.

Again, the Nigerian Naira, a key indicator of the healthiness of the economy, depreciated further against the United States Dollar on Wednesday, trading at N741 to a U.S. Dollar at the parallel market.

Meanwhile, the Central Bank of Nigeria (CBN) continued to struggle with escalating inflation rate of 20.52%. The apex bank-led monetary policy committee had raised the interest rate by 15.5% in an effort to curb inflationary pressure and rein in prices.

The CBN Governor, Godwin Emefiele stated that the interest rate will continue to rise in an attempt to reduce the high the money in circulation and lure investors into the economy.

However, in hopes of reviving the dying economy, the Nigerian National Petroleum Cooperation disclosed that Nigeria is soon expected to increase its daily production of crude oil by 500,000 barrels per day. 

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Finance

Government Revenue Surges to N2.07trn in January 2024, FAAC Discloses

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FAAC

The Federal Accounts Allocation Committee (FAAC) has revealed a significant surge in government revenue to N2.07 trillion in January 2024.

This substantial increase reflects the buoyancy of Nigeria’s economic activities despite various challenges faced by the nation.

According to FAAC’s communiqué issued after its monthly meeting in Abuja, the N2.07 trillion revenue was distributed to meet the financial needs of the federal, state, and local governments.

N1.15 trillion out of the total revenue was disbursed to the various tiers of government, indicating a robust financial inflow.

The breakdown of the revenue distribution showcased that the Federal Government received N407.267 billion, state governments obtained N379.407 billion while N278.041 billion was disbursed to local governments.

Also, N85.101 billion, equivalent to 13% of mineral revenue, was allocated to the states as derivation revenue.

FAAC also highlighted that the revenue composition included N463.1 billion from distributable statutory revenue, N391.8 billion from distributable Value Added Tax (VAT) revenue, N15.9 billion from Electronic Money Transfer Levy revenue, and N279.03 billion from exchange difference revenue.

Despite the impressive revenue figures, FAAC noted a decrease in VAT collection by N71.7 billion compared to the previous month.

This decrease suggests fluctuations in consumer spending and economic activities, which could be influenced by various factors such as policy changes, economic conditions, and consumer sentiment.

Furthermore, FAAC reported increases in revenue from Companies Income Tax, Import Duty, Petroleum Profit Tax, and Oil and Gas Royalties.

However, revenue from Value Added Tax, Export Duty, Electronic Money Transfer Levy, and CET Levies experienced declines during the period.

FAAC’s disclosure of the January 2024 revenue underscores the importance of prudent financial management and effective allocation of resources to drive sustainable economic growth and development in Nigeria.

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Finance

Private Sector Credit Hits Record High of N76.94 Trillion in January 2024 – CBN Report

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Private employers

Private sector credit in Nigeria reached a record N76.94 trillion in January 2024, according to the latest report from the Central Bank of Nigeria (CBN).

This represents a 85.2% year-on-year increase from N41.54 trillion reported in January 2023.

The CBN’s Money and Credit Statistics report unveiled that credit to the private sector experienced a substantial month-on-month surge of 23.06%, or N14.42 trillion, from N62.52 trillion in December 2023.

This surge occurred amid the implementation of the CBN’s policy to unify the naira exchange rate.

Analysts attribute the reported N76.94 trillion credit to the private sector to the recent depreciation of the naira against foreign currencies.

The naira closed at N1,356.88 per dollar in January 2024, representing a 50.87% decline or N457.49 against the dollar compared to December 2023.

This depreciation compelled banks to extend credit to major corporations to meet the CBN’s mandated Loan-to-Deposit Ratio (LDR) threshold.

The CBN’s decision to resume the enforcement of the LDR policy, effective July 31, 2023, further propelled banks to increase lending to customers, stimulating the real sector of the economy.

With the CRR mechanism updated, banks with an LDR below the prescribed level faced a 50% lending shortfall penalty.

Experts suggest that the significant increase in private sector credit underscores the growing need for businesses to secure funds amidst economic uncertainties and exchange rate volatility.

It also signifies banks’ efforts to comply with regulatory requirements and support economic growth initiatives.

As Nigeria navigates its economic landscape, stakeholders anticipate further developments in credit dynamics and monetary policies to sustain financial stability and stimulate economic expansion.

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Senate Initiates Probe into N30tn Ways and Means Loans under Buhari Administration

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Muhammadu Buhari

The Nigerian Senate has embarked on a comprehensive investigation into the disbursement and utilization of the N30 trillion Ways and Means loans obtained by the Central Bank of Nigeria (CBN) during the administration of former President Muhammadu Buhari.

The Ways and Means facility allows the CBN to provide financial support to the government to cover budget shortfalls.

The decision to probe the massive loans comes amid concerns about the transparency and accountability surrounding the utilization of these funds, particularly as the country grapples with economic challenges, food crises, rising inflation, and worsening insecurity.

The Senate’s investigation aims to shed light on how the substantial overdrafts from the CBN were acquired and expended under the leadership of former President Buhari.

There is growing apprehension that the indiscriminate spending of the overdrafts, particularly during Godwin Emefiele’s tenure as CBN governor, may have contributed significantly to the current economic predicament facing the nation.

The probe will delve into the details of the N30 trillion overdrafts, with a specific focus on examining the purpose for which the funds were allocated and how they were utilized.

Also, the Senate will scrutinize the N10 trillion disbursed under the Anchor Borrowers Scheme, as well as the utilization of $2.4 billion out of the $7 billion earmarked for forex transactions.

The initiative underscores the Senate’s commitment to ensuring transparency, fiscal responsibility, and prudent financial management in the country’s economic affairs.

It is anticipated that the probe will unearth vital insights into the financial transactions of the past administration, enabling corrective measures to be taken to address any mismanagement or discrepancies discovered.

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