Money supply declines on 8.3% banking system foreign assets net fall

Growth in money supply (M2) decelerated on month-on-month basis at the end of February 2014, the Central Bank of Nigeria (CBN) has disclosed.

The Economic Report for the month of February released by the CBN last week shows that broad money supply (M2), at N15,318.78 billion, fell by 1 percent, on month-on-month basis, compared with the decline of 1.3 percent at the end of the preceding month.

The development reflected wholly the 8.3 percent decline in foreign assets (net) of the banking system, which more than off-set the growth in aggregate domestic credit and other assets (net) of the banking system. Relative to its level at end-December 2013, broad money supply (M2) declined by 2.2 percent due, wholly, to the 11.2 percent decline in net foreign assets of the banking system.

At N7,557.2 billion, foreign assets (net) of the banking system fell by 8.3 percent at the end of the period under review, compared with the decline of 3.2 percent at the end of the preceding month. The development was attributed to the respective decline of 6.2 percent and 16.1 percent in net foreign asset of both the CBN and the banks. Relative to the level at end-December 2013, NFA declined by 11.2 percent at end-February 2014, reflecting the fall of 12 percent and 8 percent in the foreign asset holdings of the CBN and banks, respectively.

Also, narrow money supply (M1), at N6,633.8 billion, declined by 1.8 percent, compared with the decline of 3.7 percent at the end of the preceding month. The development was attributed to the 5.7 percent and 0.8 percent decline in its currency outside banks and demand deposit components, respectively. Relative to the level at end-December 2013, narrow money (M1) also declined by 5.4 percent due to the same reason.

According to the report, quasi-money declined by 0.3 percent to N8,684.8 billion, in contrast to the growth of 0.6 percent at the end of the preceding month. The development relative to preceding month, reflected the fall in time and savings deposits with banks. Over end-December 2013, quasi-money grew by 0.3 percent.

At N15,169.8 billion, aggregate banking system credit (net) to the domestic economy at end-February 2014, rose by 0.4 percent, on month-on-month basis, compared with the growth of 0.5 percent at the end of the preceding month.

The development reflected, wholly, the 1.8 percent increase in claims on the private sector, which more than offset the 18.4 percent decline in net claims on the Federal Government. Over the level at end-December 2013, aggregate banking system credit (net) to the domestic economy rose by 0.9 percent due to 1 percent increase in claims on the private sector.

Banking system’s credit (net) to the Federal Government, on month-on-month basis, fell by 18.4 percent at end-February 2014, in contrast to the increase of 13.9 percent at the end of the preceding month.

The development was due to the decline in the banking system holdings of government securities. Over the level at end-December 2013, claims on Federal Government fell by 2 percent due to 6.1 percent decline in banks holding of government securities.

Banking system credit to the private sector grew by 1.8 percent to N16,668.3 billion at the end of the review month. The development was due, wholly, to the 2.2 percent growth in claims on the core private sector.

Relative to the level at the end of December 2013, banking system’s credit to the private sector rose by 1 percent.

HOPE MOSES-ASHIKE