By Charles Ebi 

Credit to the government surged by over N11 trillion in the month of August 2024, as high interest rates make government securities more attractive to investors.

This is according to the latest money and credit stats data of the Central Bank of Nigeria ,CBN.

The CBN data also shows that credit to the government accounts for 29.4% of N105.88 trillion net domestic credit in August as the government continues to rely more on local borrowing to fund its expenditures.

This was as the private sector experienced a slight decline in credit as debt repayment intensified, buttressing the impact of rising interest rates, which have made borrowing more expensive for businesses while driving greater interest in government securities.

In August 2024, credit to the government reached N31.15 trillion, a sharp increase from the N19.83 trillion recorded in July 2024.

This marks a significant growth of N11.33 trillion or 57.1% in just one month. The surge in government borrowing reflects the increasing attractiveness of government securities, driven by higher yields resulting from persistent interest rate hikes by the CBN.

By comparison, in August 2023, government borrowing stood at N22.51 trillion, meaning that in the space of one year, government credit has risen by 38.5%, affirming the growing reliance on debt to finance public expenditure.

While the government is increasingly tapping into credit markets, the private sector appears to be retreating. Credit to the private sector in August 2024 stood at N74.73 trillion, a slight decrease from N75.51 trillion in July 2024. This marks a reduction of about N780 billion, or 1.03%. Though the decline is relatively modest, it reflects the broader trend of businesses struggling to cope with rising borrowing costs as the CBN continues its monetary tightening.

In August 2023, private sector credit was significantly lower at N56.95 trillion, highlighting that while there has been an overall increase in private sector borrowing over the past year, the rising cost of debt is starting to weigh on businesses’ willingness to expand credit further.

The CBN, under Yemi Cardoso, increased the Monetary Policy Rate ,MPR, five times to combat inflation and foster economic stability.

The first hike increased the rate from 18.75% to 22.75%, the second to 24.75%, the third to 26.25%, the fourth to 26.75%, and most recently in September 2024, the Monetary Policy Committee ,MPC, raised the rate by 50 basis points to 27.25%.

These increases, totalling 850 basis points since Cardoso’s appointment, have been driven by efforts to tackle the country’s persistent inflation challenges, which include high core and food inflation.

The CBN’s tightening monetary policy has reshaped the dynamics of credit allocation in Nigeria. Rising interest rates have made government securities more attractive to investors, as higher yields offer better returns with relatively lower risk compared to private sector lending. This has led to a surge in government borrowing, while businesses, facing higher borrowing costs, are more cautious.

However, there are concerns that prolonged tight monetary policy could stifle economic growth, especially if businesses are unable to access affordable credit to finance expansion and investment.

Also, although government securities have become more attractive due to higher yields resulting from persistent interest rate hikes by the CBN, the government is not exempt from the pressures of increased borrowing costs.

As interest rates continue to rise, the government will have to pay more to service its debt, particularly on new issuances of bonds and treasury bills. This could strain public finances further, as the cost of servicing debt could consume a larger portion of government revenue, leaving less room for critical expenditures such as infrastructure projects, social services, and other development initiatives.

The Bola Tinubu administration has relied mostly on the domestic debt market, especially treasury bills, to fund short-term obligations, a huge departure from the Muhammadu Buhari administration, which relied mostly on the CBN’s Ways and Means Advances.

Nigeria has a total Treasury Bills ,T-Bills, debt of N10.4 trillion, a 60% rise in just three months, according to data from the Debt Management Office ,DMO.

The CBN also incurred an estimated N1.55 trillion in interest payments for the 12 successful T-Bills auctions conducted in the first six months of 2024.

The interest costs in 2024 were approximately 654.7% higher than the N205.63 billion recorded the same period of the previous year.

Data from the apex bank reveals that the apex bank has sold Treasury Bills worth N8.4 trillion in the first half of the year for tenors ranging from 91-days, 182-days and 364-day bills. The stop rate, which is the interest rates accepted from the bids on offer, ranged from as low as 2.44% for some 91-day bills to as high as 21.49% for 364-day bills.

The Lagos Chamber of Commerce and Industry ,LCCI, recently lamented the effect of high interest rate of CBN’s Treasury bill noting that it is drying up funds from the private sector into government’s treasuries.

The Director-General of the Centre for the Promotion of Public Enterprise ,CPPE, Dr Muda Yusuf, called on the CBN to expedite the window of development finance for businesses to mitigate the effect of the high monetary policy rate in the country. He noted that businesses need the single-digit interest rate to drive the Nigerian economy.

Also, the President of the Dangote Group Industries Ltd, Alhaji Aliko Dangote stated that no economic growth will happen unless the bank interest rate at 30% decline. He further called for the protection of local industries, especially in manufacturing, across the country.

However, Yemi Cardoso, the Governor of the CBN earlier emphasized the necessity of maintaining higher interest rates to address the persistent inflation issues plaguing the Nigerian economy. Cardoso stated that tighter monetary policy accompanied by higher interest rates was at their disposal to solve the challenges of high inflation.

By Dickson Pat 

Money market rates diverge on the back of a significant decline in liquidity balance in the financial system following Central Bank of Nigeria ,CBN, monetary policy action.

After the benchmark interest rate was increased to 27.25%, the market dynamics was altered with expectation that local deposit money banks would begin to adjust borrowing rates.

Likewise, money market fund investors are expected to see rerating to optimise return on pooled funds. Last week, the money market experienced significant inflows, however, it was overwhelmed by strong outflows of funds, according to analysts’ notes.

The system liquidity contracted sharply to close at negative ₦584.5 billion, Afrinvest Limited said in a note, from the prior week’s level of ₦1.1 trillion. The declining liquidity balance in the financial market occurred following a series of auctions conducted by the Central Bank of Nigeria ,CBN, last week.

Nigerian Interbank Offered Rate ,NIBOR, increased across all maturities, signaling system illiquidity, said Cowry Asset Limited in an email noted. Initially, the liquidity balance in the financial system was boosted mainly due to inflows from Federal Accounts Allocation Credit ,FAAC, FGN bond coupons, and the maturity of FGN Sukuk 2024.

Interbank rates remained around 20.00% for most of the week but increased after the OMO auctions at the end of the week. Overall, the interbank rates showed mixed numbers week on week, with the Open Repo Rate ,OPR, decreasing by 26 bps to 29.43%, while the Overnight Rate (O/N) increased by 5 bps to 30% and 29.97%, respectively.

The market recorded an outflow of funds relating to FGN bonds worth N264.53 billion, and OMO totaling N252.90 billion outweighed the sizeable inflows from FAAC disbursements amounting to N828.08 billion and FGN bond coupon payments of N273.43 billion

By ABAH ADAH, Abuja

Solid Minerals Development Fund, SMDF, has commenced a training programme targeted at empowering at least 1,000 Nigerian women in the mining and utilisation of gemstone products across the value chain.

This was disclosed in a statement signed by Idowu Jokpeyibo, the head, Corporate Communications, SMDF.

 Speaking during a phase of the programme held in Lagos with 100 of the SMDF beneficiaries in attendance, the Executive Secretary, ES, of the fund, Hajia Fatima Shinkafi, underscored the commitment of President Bola Tinubu’s administration to reducing Nigeria’s reliance on crude oil through economic diversification by harnessing the country’s rich solid mineral resources. 

She expressed her appreciation for the steadfast support of the Minister, Dr Dele Alake, in advancing the agency’s mandate as well as his dedication to women empowerment in the mining sector, noting his consistent emphasis at various fora on the need to equip women with the essential skills to actively engage in the mining value chain.

Shinkafi noted that the training on gemstone and jewellery processing is a gateway to economic independence, skill acquisition, and social empowerment for the women in Nigerian communities.

She said the exercise was aimed at planting the seeds of creativity, entrepreneurship, and resilience, which will grow to yield lasting benefits for trainees, their families, and the society at large.

According to her, gemstones are among the most valuable natural resources found in the country and that Nigeria is blessed with an abundance of precious stones, many of which remain untapped or under-utilised. 

“This training will offer them the opportunity to not only create beautiful jewelry but to also build thriving businesses

“SMDF is fully committed to ensuring that training and acquisition of knowledge in the sector is sustainable and this explains why we are launching the training of 1000 young women from different parts of the country with 100 participants at this gemstone and jewellery making training. 

“We are not just focused on training, we are committed to the continued growth of the trainees. The target is to train 1000 women; those who have done the  basics can move on and be part of an advanced training”, she said.

The SMDF, according to the ES, will support them with loans and grants to set up their own businesses so that they can turn what they have learnt into a successful enterprise.

President Women in Mining in Nigeria ,WIMIN, and former House of Representatives member, Engr Janet Adeyemi, on her part submitted that through the training programme which is in its 3rd  edition, some women have been empowered and supported to carry out mining activities and jewellery-making at the global level.

She said the association has introduced various initiatives including pageants to make the sector more attractive for women.

“We started this three years ago, and everything is growing and growing. We need to retrain, we need to embrace what is happening, what is happening in our world now is mining.

While appreciating the commitment and support of the SMDF, she encouraged them to continue to partner with WIMIN. 

Also speaking, Nigeria’s former Ambassador to Philippines and Cambodia, Ambassador Folakemi Akinleye, said the training would go a long way in improving lives of rural women and open more opportunities in the mining sector which comes with huge investment and economic growth.

Mrs Tope Omage, former Director with the Central Bank of Nigeria ,CBN, described SMDF, involvement and intervention as a landmark in improving income of women in Nigeria.

In his conversation with the media, one of the programme facilitators, and a Geologist, Dr Tersoo Aga, said Nigeria is blessed with over 500 different types of gemstones in addition to other critical minerals including the industrial ones.

According to him, “The good aspect of it is that these are naturally occurring and occur predominantly within what we call the pegmatite belt of Nigeria that stretches from the southwestern part of the country to the northeastern part of the country”.

Three participants, Sola Adesanya, from Lagos State, Eden Durosola Precious, Lagos, and Hajia Umar Abubakar, Zamfara, who spoke about their experiences and expectations expressed optimism that the training would help them to pursue new career opportunities in mining.

By Aliyu Galadima 

Enrollments for the Bank Verification Number ,BVN, by bank account owners in the country has increased to 63.4 million this September.

This was revealed by the Nigeria Inter-Bank Settlement System ,NIBSS, in its BVN data just released. Previous data released by the organization showed that the enrollment database stood at 62.7 million in July.

This indicates that a total of 750,048 account owners have registered for the BVN in the last two months.

As of December 2023, the total registered BVN stood at 60 million, according to NIBSS data. This suggests that the database has grown by 3.4 million so far this year.

The significant increase in registration for the BVN this year could be attributed to the December 2023 directive of the Central Bank of Nigeria ,CBN, which ordered all banks to freeze any account not linked with BVN by April 2024.

Part of the directive also required all commercial, merchant, non-interest, payment service banks, other financial institutions, and mobile money operators, to mandate the BVN or National Identification Number ,NIN, for all accounts and wallets.

Meanwhile, the number of active bank accounts in the country shows that there is still a very wide gap between the number of accounts and the number of BVN, which is now a compulsory requirement for opening an account.

According to the recent banking data released by NIBSS, the number of active bank accounts in Nigeria stood at 231.1 million in July 2024.

Going by the current number of BVNs, there is still a wide gap between the number of accounts and the registered BVNs. However, industry analysts believe that the difference may not be much given that multiple accounts can be linked to a single BVN.

According to Enhancing Financial Innovation and Access ,EFInA,  Access to Financial Services in Nigeria 2023 Survey report, 5% (3 million) of banked adults do not have a BVN or NIN.

A BVN is a unique number that allows individual accounts to be verified across the Nigerian banking industry.

The unique ID numbers issued to every bank customer at enrolment and linked to every account that the customer has at all Nigerian banks.  According to NIBSS, the BVN gives bank account owners a unique identity that can be verified across the Nigerian banking industry, while it ensures that customers’ bank accounts are protected from unauthorized access.

According to the recent directives from the CBN, every financial account, including that of fintechs, must now be linked with BVN before it can be operational.