Credit to Federal Government rose by 34 percent to N4.87 trillion in 2018, while credit to the private sector rose marginally by 1.96 percent to N22.73 trillion.
This was revealed by Central Bank of Nigeria, CBN, in its Depository Corporation survey released last week. The survey also showed that banks’ current account rose by N440 billion to N9.84 trillion in 2018 from N9.39 trillion in 2017.
The survey showed that Broad money rose by 12.17 percent year-on-year (y-o-y) to N27.08 trillion in December 2018. The increase in Broad money resulted from a 14.26 percent y-o-y rise in Net Domestic Assets, NDA, to N15.02 trillion which was accompanied by 18.54 percent y-o-y increase in Net Foreign Assets (NFA) to N18.39 trillion.
The survey also showed that the increase in NDA resulted from a y-o-y rise of 6.42 percent in Net Domestic Credit, NDC, to N27.59 trillion, supported by a 1.64 percent y-o-y fall in Other Liabilities (net) to N12.57 trillion. Further breakdown of the NDC showed a 33.77 percent y-o-y increase in Credit to the Government to N4.87 trillion, boosted by an increase of 1.96 percent in Credit to the Private sector to N22.73 trillion.
The survey revealed that the 12.17 percent y-o-y rise in Broad Money Supply was driven by 5.15 percent y-o-y increase in Narrow Money to N11.75 trillion (as Demand Deposits and currency outside banks rose by 4.74 percent and 7.32 percent to N9.84 trillion and N1.91 trillion respectively); also, Quasi Money (near maturing short term financial instruments) rose by 18.22 percent y-o-y to N15.33 trillion.
Furthermore, Reserve Money (Base Money) increased y-o-y by 10.05 percent to N7.14 trillion as Bank reserves and currency in circulation rose y-o-y by 12.03 percent and 8.0 percent to N4.46 trillion and N2.23 trillion respectively.
Cost of funds to rise to rise despite N315bn inflow
Cost of funds in the interbank money market is expected to rise this week in spite of N315.55 billion inflow expected from maturing treasury bills (TBs).
Last week, cost of funds fell for the fourth consecutive week following the inflow of N756.62 billion into the market in the latter part of the week. The inflow comprised of N446.68 billion from matured TBs and N310 billion from statutory allocation of funds to state and local governments by the Federal Accounts Allocation Committee, FAAC. The huge inflow saved the interbank money market from severe scarcity of funds occasioned by the mop up of N536 billion by the CBN through series of secondary market (Open Market Operations, OMO) TB auction during the week, as well as sale of primary market TBs worth N255 billion during the week, and N117 billion outflow for purchase of FGN bond sold by Debt Management Office (DMO).
Consequently, average short term cost of funds fell for the fourth consecutive week by 110 basis points (bpts) last week. Data from FMDQ showed that interest rate on Collateralised lending (Open Buy Back, OBB) fell by 101 bpts to 11.07 percent last week from 12.08 percent the previous week. Similarly, interest rate on Overnight lending fell by 114 bpts to 11.86 percent last week from 13 percent the previous week.
Analysts at Lagos based Afrinvest Limited, however, opined that this trend will not persist this week in spite of N315.55 billion inflow expected for maturing TBs. “Next week, we expect money market rates to slightly advance as we expect the CBN to sustain the pace of OMOs in a bid to keep system liquidity tight. Hence, we don’t expect the OMO maturities of N315.6 billion in the coming week to improve system liquidity,” they stated.
Analysts at Lagos based Zedcrest Capital Limited also stated: “We expect rates to inch slightly higher opening next week, as the CBN is expected to resume its OMO and wholesale forex interventions consequently tightening system liquidity.”