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Credit to economy rise by 8.5 per cent in August

Banking system credit to the economy rose by 8.5 per cent in August, says Central Bank of Nigeria. Similarly, currency in circulation rose by 1.7 per cent N1.09 trillion.

According to the monthly economic report of the apex bank for August, “At N9,329.1 billion, aggregate banking system credit (net) to the domestic economy rose by 8.5 per cent on month_on_month basis, in contrast to the decline of 0.2 per cent in the preceding month.

The development reflected largely the rise in claims on both the Federal Government and the private sector. Relative to the
level at end_December 2009, domestic credit (net), also increased by 18.0 per cent.

“Banking system?s credit (net) to the Federal Government, on month_on_month basis, increased significantly by 40.2 per cent to negative N787.1 billion, compared with the increase of 11.7 per cent in the preceding month.

The development reflected the increase in banking system?s holding of Federal Government securities, reinforced by the decline in Federal Government deposits with the CBN. Over the level at end_December 2009, credit to the Federal Government rose significantly by 65.8 per cent, owing to the same reasons above. The Federal Government, however, remained a net lender to the banking system during the review month.

“On month_on_month basis, banking system?s credit to the private sector rose by 2.0 per cent to N10,113.2 billion, as against the decline of 1.9 per cent at end_July 2010. Similarly, banking system?s claim on the core private sector increased by 2.0 per cent, as against the decline of 1.6 per cent in the preceding month.

The development reflected the increase in the DMBs? claims on the sector. Relative to the level at end_December 2009, the contraction in credit to the private sector continued as it fell by 0.9 per cent. The development was attributed to the lingering effect of the recent global financial crisis and increased credit to government as banks continued to run to safety in risk_free FGN bonds.

“At N6,526.9 billion, foreign assets (net) of the banking system declined below the level in the previous month by 0.9 per cent, in contrast to the increase of 1.5 per
cent at the end of July 2010. The development was attributed largely to the 1.6 per cent fall in the CBN?s holding of foreign assets. Over the level at end_December 2009, foreign assets (net) of the banking system fell by 14.0 per cent.

“At N1,094.7 billion, currency in circulation rose by 1.7 per cent at end_August 2010 over the level in July 2010, traceable largely, to the 2.1 per cent rise in currency outside banks.

Total deposits at the CBN amounted to N4,665.4 billion, indicating an increase of 3.5 per cent over the level at the end of the preceding month. The development reflected largely, the 64.2 and 13.1 per cent increase in “others? and banks? deposits, respectively. Of the total, the percentage shares of the Federal Government, banks and “others” were 69.2, 14.1 and 16.7 per cent, respectively.”


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