By Babajide Komolafe
â€¢Credit to economy up by 17.8%
The Central Bank of Nigeria (CBN) said it lent N10 trillion to banks to fund their operations in the second quarter of the year. This reflected the severity of the liquidity crisis in the banking industry during the quarter.
Banking industry credit to domestic economy however revived during the quarter rising by 17.8 per cent as against decline ofÂ 2.6 per cent in the preceding quarter.
Currency-in-Circulation declined by three per cent owing to a 7.2 per cent fall in currency outside the banks during the period.
The CBN in its economic report for the second quarter said, â€œDeposit money banks and discount houses continued to access the standing lending facility. The lending and repo rates were fixed at 8.00 per cent after its reduction from 9.75 per cent on April 8, 2009. However, interest payment on overnight deposit by the DMBs remained at zero per cent.
Analysis of CBN lending to the deposit money banks and discount houses showed that daily lending was initially high, but declined after the series of actions taken by the Bank to inject liquidity into the banking system and the release of excess crude oil proceeds in the latter part of the quarter. Consequently, total lending facility granted to the DMBs for the quarter stood at =N=10, 299.24 billion.
At =N=1,006.6 billion, currency in circulation fell by 3.0 per cent in June 2009 over the level in March 2009. The decline was due wholly to the fall of 7.2 per cent in currency outside the banking system during the period.Â Total deposits at the CBN amounted to =N=5,388.7
billion, indicating a decline of 5.2 per cent from the level in the preceding quarter. The development was attributed largely to the fall in Federal Government deposits, reinforced by the decline in banksâ€™ deposits. The shares of the Federal Government, banks and â€œothersâ€ in total deposits at the CBN were 89.3, 5.2 and 5.4 per cent, respectively, compared with the shares of 89.0, 6.1 and 4.9 per cent, in March 2009.
Provisional data indicated growth in monetary aggregate in the second quarter, 2009. Broad money (M2) rose by 0.9 per cent to =N=9,077.0 billion, as against the decline of 1.8 per cent in the first quarter of 2009. Narrow money (M1), however, fell by 3.9 per cent to =N=4,328.5 billion from the level in the preceding quarter. The rise in M2 was accounted for largely by the 17.8 per cent increase in aggregate banking system credit to the domestic economy (net)
At =N=5,677.2 billion, aggregate banking system credit (net) to the domestic economy increased by 17.8 per cent in the second quarter of 2009, as against the decline of 2.6 per cent in the preceding quarter. The development reflected largely the 15.4 per cent rise in claims on the Federal Government, reinforced by the 3.6 per cent increase in private sector.
Banking systemâ€™s credit (net) to the Federal Government increased by 15.4 per cent to negative =N=2,879.8 billion, as against the decline of 9.6 per cent in the preceding quarter. The rise was attributed to the increase in deposit money banksâ€™ (DMBs) holding of Federal