By Our Reporter
Three commercial banks, including Zenith Bank, Guaranty Trust Bank (GTBank) and United Bank for Africa (UBA) Plc funded one third (1/3) of Federal Government’s budget in 2016 with a whopping N2.3 trillion loans.
In financing the N6.07 trillion 2016 budget, the Federal Government had borrowed N2.22 trillion from domestic and foreign finance markets.
To achieve this level of support, banks operating in the country invested in the risk free and high yield investment instruments provided by government including Bonds and Treasury Bills (T-bills).
In 2015, the three “super lenders” granted government N1.9 trillion, 18.2 per cent above what was granted to government in 2016, even as it made provision for N1.1 trillion deficit for second half of 2016 but ended up with N1.46 trillion deficit. It had recorded N1.75 trillion deficit in its fiscal operations in the first half of 2016.
In helping government finance this huge deficit through investing in government securities, UBA granted government N984 billion in 2016 as against N827.9 billion in 2015, an increase by 19 per cent.
GTBank lending to government rose by 16 per cent from N846 billion in 2015 to N984 billion in 2016 while Zenith Bank’s lending to government appreciated by 22.2 per cent to N307 billion from N251 billion recorded in the preceding year.
Analysis of banking industry total credit by sector showed that government sector constituted 8.34 per cent of total banking industry credit in 2016.
Net claims on the Federal Government increased to N4.8 trillion end of December 2016 compared with N2.89 trillion as of June 2016, representing an increase by 10.6 per cent.
The Central Bank of Nigeria said, “the development reflected significant growth in holding of government securities, especially T-bills and FGN bonds, which grew by 28.9 per cent and 42.7 per cent, respectively.”
In 2016, macroeconomic risks heightened, largely due to the slow pace of global economic recovery, dwindling oil prices, which impacted adversely on government revenue, depreciation of the naira, rising inflation and negative growth.
Experts say the current efforts by the government to stimulate domestic demand through investment in infrastructure, the Conditional Cash Transfer Programme and implementation of the National Recovery Strategy are expected to improve overall economic conditions.