Credit to the government increased by N3 trillion, or 22.5 percent, quarter-on-quarter (QoQ), from N13.3 trillion in the fourth quarter of 2021, Q4’21, to N16.3 trillion in Q1’22. This increase appears to be a result of the federal and state governments’ increased borrowing activity.

In its most recent Money and Credit figures, the Central Bank of Nigeria (CBN) revealed that credit to the government accounted for the majority of the N4.2 trillion, or 8.6%, QoQ rise in credit to the economy, which increased from N48.5 trillion in Q4’21 to N52.7 trillion in Q1’22.

The CBN reports that private sector credit increased QoQ by N1.17 trillion, or 3.3%, from N35.2 trillion in Q1’22 to N36.37 trillion in Q1’22.

In the meantime, the amount of currency in circulation (CIC) decreased from N3.32 trillion in Q4 of 21 to N3.24 trillion in Q1 of 22 (a QoQ decrease of 2.4%).

The CBN data shows that the CIC decreased from N3.32 trillion in December 2021 to N3.28 trillion in January, a 1.2% decrease. In February and March, it fell by 0.9% and 0.3%, respectively, to N3.25 trillion and N3.24 trillion.

Reserve money increased 8.3% on a quarter-over-quarter basis from N13.2 trillion in Q4 of 21 to N14.3 trillion in Q1 of 22 despite the CIC drop.

Analysts at FSDH Research, however, predicted that the government’s strategy to increase borrowing would result in higher debt payment expenses in their 2022 prognosis.

“The government intends to take on additional debt in order to pay out subsidies in 2022, which may total more than N3 trillion. Debt servicing costs as a percentage of revenue, which was already high at 76% in 2021 (January–November), will rise as a result of this.