The total credit to the Federal Government rose by 34 percent to ₦4.87 trillion in 2018, while credit to the private sector rose marginally by 1.96 percent to ₦22.73 trillion.
This was revealed by the Central Bank of Nigeria, CBN, in its Depository Corporation survey released last week. The survey also showed that banks’ current account rose by ₦440 billion to ₦9.84 trillion in 2018 from ₦9.39 trillion in 2017.
The survey showed that Broad money rose by 12.17 percent year-on-year (y-o-y) to ₦27.08 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 ₦15.02 trillion which was accompanied by 18.54 percent y-o-y increase in Net Foreign Assets (NFA) to ₦18.39 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 ₦27.59 trillion, supported by a 1.64 percent y-o-y fall in Other Liabilities (net) to ₦12.57 trillion. Further breakdown of the NDC showed a 33.77 percent y-o-y increase in Credit to the Government to ₦4.87 trillion, boosted by an increase of 1.96 percent in Credit to the Private sector to ₦22.73 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 ₦11.75 trillion (as Demand Deposits and currency outside banks rose by 4.74 percent and 7.32 percent to ₦9.84 trillion and ₦1.91 trillion respectively); also, Quasi Money (near maturing short term financial instruments) rose by 18.22 percent y-o-y to ₦15.33 trillion.
Furthermore, Reserve Money (Base Money) increased y-o-y by 10.05 percent to ₦7.14 trillion as Bank reserves and currency in circulation rose y-o-y by 12.03 percent and 8.0 percent to ₦4.46 trillion and ₦2.23 trillion respectively.
Cost of funds to rise to rise despite ₦315 billion inflow
Cost of funds in the interbank money market is expected to rise this week in spite of ₦315.55 billion inflow expected from maturing treasury bills (TBs).
Last week, cost of funds fell for the fourth consecutive week following the inflow of ₦756.62 billion into the market in the latter part of the week. The inflow comprised of ₦446.68 billion from matured TBs and ₦310 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 ₦536 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 ₦255 billion during the week, and N117 billion outflow for purchase of FGN bond sold by the 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 ₦315.55 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 ₦315.6 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.”
Forex: CBN approves NIPOST, 4 fintechs, others as IMTOs operators
On the foreign exchange scene, the CBN last week released the list of 58 firms approved as International Money Transfer Operators (IMTOs) to render international money transfer services. Highlight of the list include Nigeria Postal Service, NIPOST, and four financial technology firms namely, Flutterwave, Pagatech, Interswitch and e-Tranzact. Other notable firms on the list include Moneygram, Western Union and Worldremit.
Meanwhile, the naira recorded mixed performance in the parallel market and in the Investors and Exporters (I&E) window last week.
According to naijabdcs.com, the live exchange rate platform of the Association of Bureaux de change Operators of Nigeria (ABCON), the parallel market exchange rate fell to ₦360 per dollar last week from ₦362 per dollar the previous week, indicating ₦2 appreciation for the naira. But athe naira depreciated by 25 kobo in the I&E window, as the indicative exchange rate for the window rose slightly to ₦362.71 per dollar last week from ₦362.46 per dollar the previous week.