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Economy | Monetary Policy

Continuing Double-Digit Growth in PSCE in January 2021

Mar 03, 2021   •   by   •   Source: Proshare   •   eye-icon 789 views

Wednesday, March 03, 2021  / 10:02 AM / byFBNQuest Research / Header Image Credit: FBNQuest


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Netdomestic credit to the private sector rose by 15.0% to NGN30.56trn (USD77.5bn)at end-January according to the CBN's broad definition. This decent rate ofgrowth reflects both the CBN's higher loans-to-deposit ratio of 65% sinceDecember 2019 for deposit money banks (DMBs) and the steady expansion of itsown development finance activities.

 

Welearn from the latest communique of the monetary policy committee (MPC) fromlate January that the CBN had disbursed NGN2.0trn within its many creditinterventions in response to the Covid-19 virus. MPC members, several of whomare senior CBN staff, are robust supporters of the developmental role and havecalled for even faster disbursements.

 

Thisbroad definition of private-sector credit extension (PSCE) from all lendercategories compares with the figure of NGN19.36trn for total lending by theDMBs at end-September. The difference of c. NGN11trn is accounted for in goodmeasure by the CBN's many credits, both pre-COVID and COVID-fuelled.

 

Additionally,loans and advances by four state development banks including the recentlyrecapitalized Bank of Industry amounted to NGN900bn at end-September.

 

Atier-one DMB last week guided to loan book expansion of 10% this year, havingachieved close to 20% in 2020.

 

Amidthe uncertainties under the shadow of the virus, Nigerians have naturallysought greater access to their cash. Currency outside banks increased by 27.0%y/y to NGN2.30trn in January.

 

PSCEhas now increased at double-digit levels y/y since August 2019. This growth,together with the recession last year, will improve Nigeria's PSCE/GDP ratio,which stood at a derisory 18.5% at end-2019. Underbanked and with a sizeableinformal economy, Nigeria lags its peer economies such as South Africa, whichboasted a ratio of 76.3% in 2019.

 

Thedifference between the M2 and M3 measures of money supply consist largely ofCBN bills with money holding sectors. It picked up to NGN1.59trn in January.The CBN indicated at a conference yesterday that it plans to phase out theissuance of its OMO bills over time in favour of the NTBs it routinely sells atauction: this would likely enhance transparency as well have implications forthe naira exchange rate, the balance of payments and the reserves. 

 

Money and credit indicators (% chg; y/y)

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Sources: CBN; FBNQuest Capital Research


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Proshare Nigeria Pvt. Ltd.

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