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Banks Advance N21.3tn Loans in 10 Months

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Central Bank of Nigeria

The total domestic credit from the banking sector to the economy dropped by 0.8 per cent to N21.3tn as of the end of October 2015, statistics obtained from the Central Bank of Nigeria have revealed.

The CBN in its economic report for October stated that the drop in credit to the economy was a reflection of the 18.9 per cent decline in net claims on the Federal Government.

The report, a copy of which was obtained by our correspondent in Abuja on Friday, said while the total credit to the private sector experienced an increase of 1.9 per cent to N19.07tn, the credit to the Federal Government dropped by 18.9 per cent to N2.26tn.

It attributed the decline in credit to the government to a drop in bank’s holding of the government securities particularly the Nigerian Treasury Bills which fell by 10.3 per cent during the period.

It said, “At N21.34tn, aggregate credit to the domestic economy, on month-on-month basis, fell by 0.8 per cent at the end of October 2015 in contrast to the 0.6 and four per cent growth at the end of the preceding month and the corresponding period of 2014, respectively.

“The development reflected the 18.9 per cent decline in net claims on the Federal Government, which more than offset 1.9 per cent growth in claims on the private sector.

“Over the level at end of December 2014, net domestic credit, however, grew by 10.8 per cent at the end of the review period, compared with the growth of 11.7 per cent at the end of the preceding month.

“The development reflected the increase in net claims on both the Federal Government and private sector.”

The report did not provide details of where lending was channelled in the private sector but noted that growth in the key monetary aggregate decelerated during the period.

The CBN Governor, Mr. Godwin Emefiele, had while speaking after the recent Monetary Policy Committee meeting said the apex bank in November reduced the lending rate from 13 per cent to 11 per cent but stressed its objective of easing lending to the real sector of the economy had not been achieved.

He said the CBN would continue to adopt moral suasion to encourage the Deposit Money Banks to support financing for targeted lending to the real sector as well as agriculture, solid minerals and the Small and Medium Enterprises sectors of the economy.

He said, “The committee acknowledged the continuous liquidity surfeit in the system stemming partly from the recent growth-stimulating monetary policy measures, as well as the tendency of the banks to invest excess reserves in government securities, rather than extend credit to the needed sectors of the economy.

“To this end, the committee once again urged the deposit money banks to improve lending to the real sector, as part of their patriotic obligations to the country and enjoined the management of the bank to continue to explore ways of incentivising lending to employment and growth-generating sectors, particularly the SMEs.”

When asked if the CBN would consider forcing banks to lend to the real sector, the governor said inasmuch as the CBN would prefer that the DMBs increased their lending to the real sector, it would be practically impossible to force them to do so owing to the fact that banks were established to make profit.

He said, “Unfortunately, the DMBs are in business to make money and we cannot regulate their interest rate. And so it can be difficult to really force them to lend to a particular set of people.

“But what we can continue to do is to put in place policies that will encourage them to do so or we can continue to incentivise them by putting in place policies that will encourage them to do so.

“So it is a free market and we cannot really compel them as it is expected. We will continue to try.

“This is why at the last meeting, we reduced the Cash Reserve Requirement from 25 per cent to 20 per cent. And we then insisted that that liquidity that will be made available or that those banks can only enjoy the reduction if they introduce to the CBN projects that are targeted at the real sector such as manufacturing, agriculture and the SMEs.”

He said the apex bank remained optimistic that the banks would heed the advice and lend to the real sector.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Banking Sector

Buhari Expresses Confidence in Banking Institutions to Tackle Economic Challenges

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President Muhammadu Buhari

President Muhammadu Buhari has expressed his confidence in the West African Banking Association (WABA) to tackle economic challenges in the West African region.

The president expressed his trust while receiving a team from WABA, led by its President, Thierno Seydou Nourou Sy, at the State House in Abuja.

The president stated that the sub-region needs to come to an agreement on low access to financial services and recovery from the COVID-19 pandemic.

According to him, the association, founded in 1981, brings together over 250 commercial banks and 15 institutions from across West Africa, and for many centuries, African countries have traded with one another without a formalized and structured system. He, however, noted that over time, global trade had become more complex and organized.

The president expressed optimism that the launch of the African Continental Free Trade Area will mark a watershed moment in the way African countries do business.

“More importantly, we will turn the page in ensuring that we deepen and expand our industrial capabilities by making sure we export less of what we have been endowed with in the primary or raw form, and convert larger portions of these resources into finished materials.

“That will allow us to benefit from the revenue earned from the added value of exporting a finished product,” he said.

“Our ability to overcome the current phase of our development lies in our resolve to work jointly via our regional and sub-regional organizations where we can all reach a common understanding to fight against a common enemy.

“This is one of the reasons I am delighted with the strides ECOWAS has been making towards unanimity and forging alliances with a goal to resolve issues that confront the sub-region.

“I believe that this is also the approach that is being followed in the West African Bankers’ Association and the West African Monetary Union,’’ he added.

While commenting on WABA’s ongoing attempts to synchronize monetary and fiscal policy, the president pushed the organization to find common ground despite the particular macroeconomic challenges that each member-state faces.

He pledged that Nigeria would always be ready to support efforts that are geared towards improving the lives of all its citizens “as long as they do not place us at a disadvantage.”

The WABA President praised Nigeria’s leadership role in the African economy, while also praising President Buhari’s leadership.

“That’s why we are here for counsel and guidance for the financial sector in West Africa,” he said. He further urged the president to be an advocate for the greater inclusion of WABA in the ECOWAS structure.

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Finance

NGX Sheds 0.13% on Monday to Extend its Decline

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Stock - Investors King

The Nigerian Exchange Limited (NGX) extended its decline on Monday as investors exchanged 263,338,835 shares worth N3.549 billion in 4,549 billion.

The market value of all listed equities decreased by N37 billion from N28.562 trillion it closed on Friday to N25.525 trillion while NGX shed 0.13% to close at 52,911.51 index points on Monday.

Jaiz Bank led the most traded stocks with 114007816 shares worth N101,752,697.03. Followed by GTCO’s 12,872,851 shares valued N302,842,620.75. See other details below.

Top Gainers 

Symbols Last Close Current Change %Change
CONOIL N 31.15 N 34.25 3.10 9.95 %
MRS N 13.60 N 14.95 1.35 9.93 %
MCNICHOLS N 2.13 N 2.34 0.21 9.86 %
ACADEMY N 1.23 N 1.35 0.12 9.76 %
NPFMCRFBK N 1.87 N 2.02 0.15 8.02 %

Top Losers 

Symbols Last Close Current Change %Change
PRESCO N 200.00 N 180.00 -20.00 -10.00 %
GSPECPLC N 3.41 N 3.07 -0.34 -9.97 %
NEIMETH N 1.76 N 1.59 -0.17 -9.66 %
UACN N 14.40 N 13.20 -1.20 -8.33 %
NEM N 4.39 N 4.05 -0.34 -7.74 %

Top Trades

Symbols Volume Value
JAIZBANK 114007816.00 101752697.03
GTCO 12872851.00 302842620.75
TRANSCORP 12806324.00 16725610.46
ACCESSCORP 11657629.00 115657901.70
ZENITHBANK 8579430.00 207021363.25

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Finance

Nigeria Raises Interest Rate by 150 Basis Points to 13%

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Godwin Emefiele - Investors King

The Central Bank of Nigeria (CBN) led Monetary Policy Committee on Tuesday unanimously agreed to raise interest rates by 150 basis points from 11.5% to 13% to rein in escalating consumer prices.

The apex Governor, Godwin Emefiele disclosed this while speaking to the media on Tuesday, May 24th, 2022.

In 2020, the committee cut interest by 50 basis points to 11.5% in September 2020 to encourage borrowing and deepen new investment to stir growth and halt the plunge in economic productivity during the peak of COVID-19.

The nine-member committee voted unanimously to keep Monetary Policy Rate (MPR) at 13% and others as follow:

  • The asymmetric corridor of +100/-700 basis points around the MPR was retained
  • CRR was retained at 27.5%
  • While Liquidity Ratio was also kept at 30%

The increase may not be unconnected to Nigeria’s high inflation rate of 16.82% in April. The committee is now projecting an aggressive increase in the inflation rate due to the forthcoming general election.

Emefiele said the MPC is suspicious “there might be an aggressive accretion of inflation”. Therefore, to prevent the looming inflation, he said the committee had to raise the interest rate by 150 basis points.

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