In August 2022, the total net domestic credit was N61.2 trillion, increasing by 33 percent from 46 trillion in August 2021.2 Net domestic credit comprises credit to the government and credit to the private sector. About two-thirds of the credit went to the private sector and the remaining to the government. In August, the total credit to the private sector rose to N40.2 trillion from N33.4 trillion in August 2021, suggesting an increase of 20.2 percent. Similarly, credit to the government rose to N33.4 trillion from N12.6 trillion, indicating an increase of 67.1 percent. The analysis shows that credit to the government grew at a faster rate compared to credit to the private sector. The growth in credit to the government is primarily due to low revenue mobilization. Consequently, the government needs to boost its revenue base to reduce its fiscal deficit and the size of loan requests from the domestic financial market. In addition, the fast growth in credit to the government is likely to crowd out credit available to the private sector. Furthermore, adequate provisions should be made to strengthen the debt management process to reduce the misappropriation of credit to the government. This can be achieved by introducing mechanisms that would promote efficient and transparent use of credit obtained by the government.
