…As credit to Federal Government dips by 7.2 percent
The 5.5 percent increase in claims on the private sector drove the aggregate banking system's credit (net) to the domestic economy by 4.6 percent in July 2009, the Central Bank of Nigeria (CBN) disclosed.
Claims on the private sector include gross credit from the financial system to individuals, enterprises and non-financial public entities not included under net domestic credit, as well as financial institutions not included elsewhere.
Before the recent CBN cleansing exercise in the banking sector, banks' credit to the economy had been the major driver of recorded growth in other sectors of the economy. This is an indication that other sectors' activities may have been boosted in relative terms by the 4.6 percent increase in banks' credit to the economy.
This recorded credit level is compared to the increase of 3.6 percent in the preceding month.
At N3.088billion, the banking system's credit (net) to the Federal Government declined by 7.2 percent, compared to the fall of 4.9 percent in June, 2009. The fall was attributed wholly to the 11.1 percent decline in deposit money banks' (DMBs) holdings of government securities during the month.
The banking system's credit to the private sector rose by 5.5 percent to N9.026 billion, compared to the increase of 0.6 percent in June 2009. This reflected largely the 4.6 percent increase in DMBs' claims on other private sectors. At N7.554 billion, foreign assets (net) of the banking system declined by 1.2 percent, as against the increase of 0.1 percent in the preceding month. The development was attributed to the fall in both the CBN and DMBs' holdings.
Meanwhile, the recorded contraction in broad money (M2) is a reflection of the respective decline of 1.2 and 8.5 percent in net foreign assets and other assets (net) of the banking system. Barley a month to the end of year 2009, the apex bank noted in its July report that over the level at end-December 2008, M2 declined by 3 percent.
With the expectation of more developments on the sector by the CBN as the year draws to a close, monetary and credit developments in the economy have been trailed with mixed developments in July.
For instance, provisional data by the CBN indicated a decline in monetary aggregates at end July 2009, while broad money (M2) fell by 2.1 percent to N8.889 billion, compared to the 4.1 percent decline in June 2009. Similarly, narrow money (M1) declined by 4 percent to N4.303 billion, as against the increase of 3.8 percent in the preceding month.
The CBN revealed that quasi money fell by 0.2 percent to N4.585 billion, in contrast to the increase of 4.4 percent in June 2009. The development reflected the decline in all the components, namely: time, savings and foreign currency deposits of the DMBs.
Other assets (net) of the banking system also fell by 8.5 percent to N4.602 billion, compared to the decline of 3.4 percent in the preceding month. The fall was attributed to the decline in unclassified assets of both the CBN and the DMBs.
At N1,008 billion, currency in circulation increased by 0.2 percent in July 2009, over the level in the preceding month. The rise was due to the 2.7 percent increase in currency outside the banks. Monetary aggregates contracted further in July 2009, while banks' deposit and lending rates indicated a general increase. The value of money market assets increased, largely on account of the rise in Commercial Papers (CPs).
