Money market rates were generally stable and moved in tandem with the level of liquidity in the first quarter (Q1) of 2020.
The Central Bank’s economic report for the first quarter indicated that the daily interbank call rate ranged from 5.00 per cent to 7.24 per cent, while the Open Buy-Back (OBB), a money market instrument used to raise short term capital, ranged from 1.77 percent to 21.02 percent in the Q1 2020.
Average interbank and OBB rates were 10.68 percent and 12.08 percent, respectively. Other rates, such as the 7-day and 30-day NIBOR, traded at averages of 11.74 per cent and 9.81 percent, respectively.
The CBN Staff estimates showed that the average prime and maximum lending rates rose by 0.02 percentage point and 0.47 percentage point, respectively, to 15.01 percent and 30.70 percent, in the review period, above their levels in the preceding quarter. The average term deposit rate fell by 1.46 percentage points to 6.27 percent.
The spread between the average term deposit and the average maximum lending rates widened by 1.93 percentage points to 24.43 percentage points in the first quarter of 2020. With the headline inflation at 12.26 per cent in March 2020, all deposit rates remained negative in real terms, while prime and maximum lending rates were positive in real term.
In the review period, the Bank maintained a non-expansionary monetary policy stance by retaining the Monetary Policy Rate at 13.5 percent. Despite this, the broad measure of money supply (M3), on quarter-onquarter basis, rose by 2.5 per cent to N35.63 trillion at end-March 2020, compared with the growth of 1.6 per cent and 2.3 percent at the end of fourth quarter of 2019 and the corresponding quarter of 2019, respectively. The development was due, mainly, to the 10.2 and 5.0 percent increase in net foreign assets of the banking system and domestic claims. The rise in net foreign assets was due, largely, to the exchange rate adjustment, while that of domestic claims reflected the increase in net claims on central Government and claims on other sector.
Narrow money supply (M1), on quarter-on-quarter basis, grew by 5.0 percent to N11.06 trillion, at the end of March 2020, compared with the growth of 9.0 per cent at the end of the fourth quarter of 2019, but was in contrast to the decline of 5.0 pe cent recorded at the end of the first quarter of 2019. The growth in narrow money supply (M1) at the end of March 2020, reflected, wholly, the 7.8 percent rise in transferable deposits.
Other deposits, on quarter-on-quarter basis, grew by 8.4 percent to N19.78 trillion at the end of March 2020, compared with the growth of 6.1 per cent and 3.4 per cent in the fourth quarter of 2019 and the corresponding period of 2019, respectively.
The growth in other deposits was attributed to the increase in savings, time and foreign currency deposits of other depository corporations.
According to the report claims on domestic economy (net), on quarter-on-quarter basis, grew by 5.0 percent to N37.97 trillion at the end of March 2020, reflecting, wholly, the 2.6 and 5.8 per cent increase in net claims on government and claims on other sectors, compared with the growth of 1.4 percent and 15.9 percent at the end of the fourth quarter of 2019 and the first quarter of 2019, respectively.
Net banking system claims on Government, on quarter-on-quarter basis, grew by 2.6 percent at the end of March 2020, compared with a growth of 48.0 per cent in the first of quarter of 2019, but was in contrast to the 4.4 percent decline recorded at the end of the fourth quarter of 2019. The development reflected the increase in holdings of government securities by the monetary authority.
On quarter-on-quarter basis, banking system’s credit to other sectors of the economy rose by 5.8 per cent to N28.24 trillion at the end of March 2020, compared with the growth of 3.6 percent and 9.2 percent in the fourth quarter of 2019 and the first quarter of 2019, respectively. The development was attributed, largely, to the 9.1, 0.1 and 5.9 percent growth in claims on financial corporations, claims on state and local governments and claims on the private sector, respectively.
