Local Investors Loan FG N2.2trn

The Federal Government has borrowed N2.2 trillion from local investors through FGN Bonds, treasury bills and the FGN Savings Bonds to help fund the N6.4 trillion deficit spending in budget 2022.

The latest borrowing continues to make good the FG’s ‘threat’ as contained in the budget.  Under the approved 2022 Budget, the FG had planned to spend N17.1 trillion with projected revenue of N10.7 trillion and fresh borrowing of N6.4 trillion to be financed by foreign borrowings of N2.57 trillion, domestic borrowings of N2.57 trillion, privatization proceeds of N90.7 billion, and multilateral /bi-lateral loan drawdowns of N1.16 trillion.

Thus the net borrowing of N1.93 trillion from local investors in Q1’22 represents 75 per cent of proposed borrowing from local investors in 2022.

The latest loan, when combined with the $1.25 billion (N520 billion) borrowed from foreign investors last week through Eurobonds, indicates an N2.45 trillion increase in the nation’s public debt profile to N42 trillion in Q1’22.

Meanwhile, investors demand for FGN Bonds and Treasury bills, which are the two main debt instruments of the federal government, has spiked by 75 per cent, year-on-year, (YoY), to N4 trillion in the first quarter of the year, Q1’22, from N1.17 trillion in the corresponding quarter of last year, Q4’21.

Reportedly, the sharp increase in investors’ demand was driven by the huge volume of idle cash (excess liquidity) in the financial system, The huge volume of excess liquidity occasioned by the expansionary monetary policy of the Central Bank of Nigeria, CBN, in its quest to sustain the upward momentum in economic growth as reflected in the 3.4 per cent growth in the nation’s Gross Domestic Growth, GDP, in 2021 from 1.8 per cent contraction in 2020.

Among other measures, the CBN increased net liquidity injection into the interbank money market by 110 per cent to N770 billion in the first quarter of the year, Q1’22, from N367 billion in the fourth quarter of last year, Q4’21.

As a result of the sharp increase in net liquidity injection, the average daily opening position of the interbank money market in terms of excess liquidity rose by 73 per cent, QoQ, to N246.84 billion in Q1’22, from N143.42 billion in Q4’21.

The liquidity surge triggered by the above development, resulted in a 75 per cent, YoY upsurge in demand for FGN bonds and NTBs in Q1’22.

It will be noted that while the FG increased borrowing through FGN Bonds and FGN Savings Bonds by 15.7 per cent and 21 per cent, YoY respectively in Q1’22, it, however, reduced borrowing through NTBs by 19.7 per cent YoY during the quarter.