Credits to Private Sector Increase to ₦28.67 trillion

Credits to private sector increased by 1.51% to ₦28.67 trillion in the month of April, Cowry Asset Management Limited stated in a financial market review note.

However, currency outside Banks jerked up marginally by 0.7% to ₦1.9 trillion in April, 2020 as depositors demand for cash increase amidst economic lockdown.

This is coming as the Central Bank of Nigeria (CBN) Depository Corporation’s survey showed a 0.19% month-on-month (m-o-m) rise in broad money supply (M3 money) to ₦35.70 trillion in April 2020.

The firm said this resulted from a 1.87% increase in Net Domestic Assets (NDA) to ₦29.78 trillion.Credits to Private Sector

This was partly offset by a 7.52% decrease in Net Foreign Assets (NFA) to ₦5.92 trillion.

On domestic asset creation, the increase in NDA was chiefly driven by a 2.96% m-o-m increase in net domestic credit (NDC) to ₦39.10 trillion.

Meanwhile, Cowry said it expects credit to private sector and government to rise further in the coming months amid CBN palliative measures and the planned huge borrowing by FG.

Further breakdown of the NDC showed a 7.15% m-o-m increase in credit to the Government to ₦10.43 trillion.

As well, there was a 1.51% rise in credit to the private sector to ₦28.67 trillion.

On the liabilities side, Cowry explained that the 0.19% m-o-m increase in M3 Money was driven by the 2.97% m-o-m increase in M2 Money.

In the period, M2 money increase to ₦31.76 trillion, but was partly neutralized by a 17.74% fall in treasury bills held by money holding sector to ₦3.94 trillion.

Analysts stated that the increase in M2 was propelled by a 1.98% rise in Quasi Money – near maturing short term financial instruments – to ₦20.18 trillion and a 4.74% increase in narrow money (M1) to ₦11.59 trillion.

Of which, demand deposits increased by 5.57% to ₦9.68 trillion, and currency outside banks, rose by 0.70% to ₦1.90 trillion.

Reserve or base money rose sharply m-o-m by 20.70% to ₦12.25 trillion as Bank reserves rose significantly m-o-m by 26.61% to ₦9.94 trillion.

This was accompanied by a 0.49% rise in currency in circulation to ₦2.31 trillion.

In another development, Cowry Asset said the recently released inflation report by the National Bureau of Statistics which showed a 12.40% rise in annual inflation rate for the month of May; higher than 12.34% printed in April, was in line with its expectations.

The printed higher inflation rate was partly due to a rise in imported food index by 16.26% (higher than 16.24% in April) – against the backdrop of further depreciation of the Naira against the USD.

Specifically, two months moving average foreign exchange rates at the Bureau de Change and the parallel markets rose (Naira depreciated) year on year by 18.74% and 21.51% to ₦425.17/USD and ₦437.91/USD respectively in May 2020.

Core inflation rate also jumped to hit double-digit, 10.12%, from 9.98% in April, partly on higher transportation cost (climbed by 10.09%; from a 9.78% rise).

Banking Sector Non-Performing Loans Drop by 41% in 2019

In the same vein, price of clothing & footwear rose by 10.39% compared to a 10.33% increase in the preceding month.

Meanwhile, food inflation rate rose to 15.04% (higher than 15.03% in April). On a monthly basis, annual inflation rate rocketed to 1.17% in May (from 1.02% in April), as imported food inflation and food inflation indices rose by 1.27% and 1.43% respectively.

Nevertheless, despite the rising transport inflation rate which jumped by 1.03%, core inflation indices rose at a slower pace, by 0.88%, down from 0.93% recorded in April.

“We expect credit to private sector and government to rise further in the coming months amid CBN palliative measures and the planned huge borrowing by FG”, Cowry Asset stated.

The firm added that these, in addition to the current planting season and the planned increase in electricity tariff in July, would put pressure on food and non-food prices going forward.

Credits to Private Sector Increase to ₦28.67 Trillion.

#Credits to Private Sector