FG Borrows N2.9tn from Banks in Three Months

Fri, Apr 29, 2016
By publisher
3 MIN READ

Business Briefs

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THE Central Bank of Nigeria, CBN, has revealed that the harsh economic condition in the country forced the federal government to borrow the sum of N2.89 trillion from the banking sector in the fourth quarter of 2015. These figures were contained in the fourth quarter economic report of the apex bank.

According to the report, the total credit of N2.89tn from the banking sector to the federal government was an increase of 3.8 per cent over the amount borrowed in the third quarter of 2015. The CBN said 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.

The report stated, “Banking system’s credit (net) to the Federal Government, quarter-on-quarter, rose by 3.8 per cent to N2.89tn, compared with the growth of 11.0 per cent 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 per cent, compared with the growth of 142.4 per cent at the end of the preceding quarter.”

Government’s borrowing from the banks may be part of measures to meet up with its operational expenses due to the persistent drop in the price of crude oil in the international market. The drop has led to a serious shortfall in the amount accruing to the Federation Account, which has in turn reduced the funds available for distribution among the three tiers of government.

The apex bank explained that 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.

—  May 9, 2016 @ 01:00 GMT

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