Credit to Private Sector Hits N22.3tn in Q4
Banking system’s credit to the private sector grew moderately by 1.2 per cent, on quarteron-quarter basis, to N22.289 trillion at the end of the fourth quarter of 2017, compared with the 0.2 per cent growth recorded at the end of September 2017.
The development relative to the preceding quarter was attributed to the 0.1 and 18.9 per cent increase in claims on the core private sector and claims on the state and local governments.
Over the level at end-December 2016, banking system’s credit to the private sector grew by 1.4 per cent, compared with the 0.2 per cent growth at end-September 2017.
Also, aggregate credit (net) to the economystood at N25.863 trillion as at the end of the fourth quarter of 2017, the Central Bank of Nigeria (CBN) has revealed.
The CBN stated these in its economic report for the fourth quarter of 2017.
The amount of aggregate credit represented adecline by 4.2 per cent at the end of the review quarter, compared with the decline of 0.9 per cent at end-September 2017.
The development relative to the preceding quarter, reflected wholly the 28 per cent decline in net claims on the federal government, which more than offset the 1.2 per cent rise in claims on the private sector.
However, over the level at end-December 2016, aggregate credit (net) fell by 3.7 per cent, due to the 26.7 per cent fall in net claims on the federal government.
According to the report, despite the nonexpansionary monetary policy stance of the CBN in the fourth quarter of 2017, growth in the major monetary aggregates trended upward.
Net foreign assets and other asset (net) of the banking system rose by 47.4 per cent and 10.6 per cent above the levels in the preceding quarter, respectively, while aggregate credit to the domestic economy fell by 4.2 per cent, relative to the levels in the preceding quarter.
However, the report showed that on quarter-on-quarter basis, foreign asset (net) of the banking system grew by 47.4 per cent to N14.813 trillion at the end of December 2017, compared with the growth of 18.7 per cent in the preceding quarter.
The development was due to the 46.2 per cent and 114.2 per cent increase in foreign asset holdings of the CBN and banks, respectively, arising from renewed investor confidence in the economy.
Over the level at end-December 2016, net foreign assets of the banking system increased by 61.9 per cent in the fourth quarter of 2017, compared with growth of 9.9 per cent at the end of the third quarter of 2017.
The growth was due to the increase in the foreign assets holdings of the CBN and banks.
Other assets (net) of the banking system, on quarter-on-quarter basis, fell by 10.6 per cent to negative N16,675.15 billion at end-December 2017, compared with the fall of 9.9 per cent at end-September 2017. The development was due to the decline in unclassified assets of the CBN and banks.
Over the level at end-December 2016, other assets (net) of the banking system fell by 34.3 per cent, compared with the decline of 21.5 per cent at the end of the preceding quarter.
Money Supply
Consequently, on quarter-on-quarter basis, broad money supply (M2), rose by 9.3 per cent to N24.001 trillion, in contrast to the 0.1 per cent decline at the end of September 2017.
Over the level at the end of December 2016, M2 grew by 1.7 per cent due, wholly, to the 61.9 per cent growth in net foreign asset of the banking system, in contrast to the 6.9 per cent decline at the end of the preceding quarter.
On the other hand, on a quarter-on-quarter basis, narrow money supply (M1), grew by 9.7 per cent to N11.036 trillion at the end ofDecember 2017, in contrast to the 1.2 per cent decline at the end of the preceding quarter.
The increase in M1, relative to the preceding quarter, reflected the 24.2 per cent and 7.2 per cent rise in currency outside banks and demand deposits of the banking system, respectively.
Over the level at the end of December 2016, M1, fell by 2.1 per cent, compared with the decline of 10.7 per cent at the end ofSeptember 2017.
The development reflected the 2.1 per cent apiece fall in its currency and demand deposit components.
Quasi-money, at N12.965 trillion, rose by nineper cent on quarter-on-quarter basis, compared with 0.8 per cent and 1.1 per cent growth in the preceding quarter and the corresponding period of 2016, respectively. The developmentrelative to the preceding quarter was due to the increase in foreign currency deposits in banks.
Over the level at the end of December 2016, quasi money rose by 5.2 per cent, in contrast to the decline of 3.5 per cent at the end of the preceding quarter.
Currency-in-circulation
At N2.157 trillion, currency-in-circulation rose by 21.1 per cent, above the level in the third quarter of 2017. The development reflected the growth in currency outside banks. Total deposits at the CBN amounted to N13.172 trillion, indicating 7.5 per cent increase over the level at the end of the third quarter of 2017. The development was because of the rise in the deposits of banks, federal government and the “others” in the review quarter.
Of the total deposits at the CBN, the report stated that the shares of the federal government, banks and “others” were N6.018 trillion (45.7 per cent), N4.320 trillion (32.8 per cent) and N2.834 trillion (21.5 per cent), respectively.
“Growth in banks’ reserves at the CBN and currency-in circulation accounted for the 16.5 per cent rise in Reserve Money (RM) to N6,477.6 billion at end-December 2017, compared with the level at end-September 2017.
“Despite the mixed trends in the liquidity condition of the domestic money market, there was relative stabllity in the financial market during the fourth quarter of 2017.
“Notwithstanding the non-expansionary monetary policy stance of the Bank, liquidity was boosted by fiscal injections and maturing CBN bills. Withdrawals as a result of the CBN foreign exchange interventions and Open Market Operations (OMO), helped to stabilise the market.
“Accordingly, money market rates moved in tandem with the trend of liquidity in the financial market during the review period,” it added.
Furthermore, it stated that total value of money market assets outstanding at the end of the fourth quarter of 2017 was N12.122 trillion, showing an increase of 0.8 per cent, in contrast to the decline of 3.0 per cent at the end of the preceding quarter. The development was attributed to the 3.6 per cent increase in FGN Bonds outstanding in the review quarter.
Interest Rate Developments
Developments in banks’ deposit and lending rates were mixed in the fourth quarter of 2017, according to the report.
With the exception of the 7-day and 1-month deposit rates, which rose by 0.23 and 0.18 percentage point, to 4.55 per cent and 9.12 per cent, respectively, all other deposits rates of various maturities fell from a range of 7.39 -11.40 per cent at end-September 2017 to a range of 7.34 -11.23 per cent in the review quarter.
The average savings rate remained unchanged at 4.08 per cent, same as in the preceding quarter, while the average term deposit rate fell by 0.05 percentage point to 8.82 per cent at end-December 2017.
The average prime lending rate rose by 0.04 percentage point to close at 17.78 per cent at end-December 2017.
The average maximum lending rate, however, fell by 0.07 percentage point to 31.11 per cent in the review quarter.
Consequently, the spread between the weighted average term deposit and maximum lending rates narrowed by 0.02 percentage point to 22.29 percentage points at the end of the fourth quarter of 2017.
Similarly, the margin between the average savings and the maximum lending rates narrowed to 25.56 percentage points from 26.86 percentage points in the preceding quarter.
With inflation at 15.37 per cent at endDecember 2017, all deposit rates were negative in real terms, while lending rates were positive in real terms.