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Credit to Private Sector Rises to N21.425tn

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Private Sector

At N21.425trillion, banking system’s credit to the private sector grew by 13.5 per cent in the second quarter of 2016, compared the previous quarter.

The Central Bank of Nigeria (CBN) disclosed this in its second quarter 2016 economic report.

The development was due to the growth in claims on the core private sector. Over the level at end December 2015, banking system’s credit to the private sector grew by 14.5 per cent, compared with the growth of 0.9 per cent and 4.3 per cent recorded at the end of the preceding quarter and the corresponding period of 2015, respectively

Also, at N24.318 trillion, aggregate domestic credit (net) to the economy, on quarter-on-quarter basis, grew by 7.3 per cent, compared with the growth of 4.9 per cent and 3.8 per cent at the end of the preceding quarter and the corresponding quarter of 2015, respectively.

The development, relative to the preceding quarter was attributed to the 13.5 per cent growth in claims on the private sector. Over the level at end of December 2015, net domestic credit rose by 12.5 per cent, compared with the growth of 4.9 per cent at the end of the preceding quarter. The development reflected the growth in claims on the private sector.

Similarly, the report showed that banking system’s credit (net) to the federal government fell by 23.5 per cent to N2.893 trillion, in contrast to the growth of 30.7 and 26.5 per cent at the end of the preceding quarter and the corresponding quarter of 2015, respectively. The development was due to the fall in banks’ holding of government securities.

Relative to the level at the end of the preceding quarter, foreign assets (net) of the banking system, rose by 2.8 per cent to N7.105 trillion at end-June 2016, in contrast to the decline of 1.8 per cent at the end of the preceding quarter. Furthermore, the development was attributed, largely, to the increase in foreign asset holdings of the banks, following the adoption of a flexible exchange rate regime.

“Over the level at end December 2015, foreign assets (net) rose by 25.7 per cent at end-June 2016, in contrast to the decline of 1.8 and 14.4 per cent at the end of the preceding quarter and the corresponding period of 2015, respectively,” it added.

At N1.685 trillion, currency-in-circulation declined by seven per cent in the review quarter, compared with the decline of 2.5 per cent at the end of the preceding quarter. The development was due, largely, to the decline in vault cash.

Total deposits at the CBN amounted to N10.502 trillion, indicating an increase of 8.1 per cent relative to the level at the end of the preceding quarter. The development reflected the significant increase in federal government deposits.

Of the total deposits at CBN, the shares of the federal government, banks and ‘Others’ were N5.021 trillion (47.8 per cent), N3,687 trillion (35.1per cent) and N1.794.trillion (17.1 per cent), respectively.

Reserve money (RM) fell by 6.4 per cent to N5.372 trillion at the end of the second quarter, reflecting the decline in both banks’ reserves with the CBN and currency in circulation.

“Commercial Paper (CP) outstanding held by banks, rose to N0.53 billion in the second quarter of 2016, compared with N0.45 billion in the preceding quarter. The development reflected increased investment in CPs by the commercial banks, during the review quarter. As a ratio of total assets outstanding, CPs constituted 0.01 per cent, same as in the preceding quarter.

“Bankers’ Acceptances (BAs) outstanding rose by 141.75 per cent to N29.76 billion, compared with N12.31billion at the end of the preceding quarter. The development was attributed to the increase in investment in BAs by the banks, during the quarter.

“Consequently, BAs accounted for 0.28 per cent of the total value of money market assets outstanding, at the end of the second quarter of 2016, compared with 0.13 per cent, at the end of the preceding quarter,” it added.

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

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Economy

Nigeria’s Plan to Review Oil Companies’ Gas Flaring Strategies

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Oil

Nigeria is ramping up its efforts to address environmental concerns in the oil and gas sector with a comprehensive plan to review gas flaring strategies of international and indigenous oil companies.

The Minister of State for Environment, Dr. Iziaq Salako, announced this initiative during a national stakeholders engagement meeting on methane mitigation and reduction held in Abuja, Investors King reports.

Gas flaring, a common practice in the oil industry, releases methane—a potent greenhouse gas—into the atmosphere, contributing to climate change and posing health risks to communities near oil facilities.

Nigeria aims to end routine gas flaring by 2030, aligning with global climate goals and commitments.

Dr. Salako explained the importance of reducing methane emissions and highlighted the detrimental effects on public health, food security, and economic development.

He outlined practical steps being taken to tackle methane emissions, including the development of methane guidelines and the engagement of government institutions.

The ministry, through the National Oil Spill Detection and Response Agency, will conduct periodic reviews of oil companies’ plans to ensure compliance with the gas flaring deadline.

Deloitte management consultants will assist in conducting comprehensive forensic audits to scrutinize the legitimacy of forward-contracted transactions.

President Bola Tinubu’s commitment to environmental sustainability underscores the government’s dedication to addressing climate change and fulfilling its multilateral environmental agreements.

The engagement event served as a platform for stakeholders to discuss methane mitigation strategies, existing policies, and implementation challenges.

Collaboration and dialogue among diverse sectors are crucial in charting a unified course towards sustainable methane reduction in Nigeria’s oil and gas industry.

As the country navigates its environmental agenda, ensuring accountability and transparency in gas flaring practices remains paramount for achieving a greener and healthier future.

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Economy

Interest Rate Jumps to 24.75% as CBN Takes Aggressive Stance Against Inflation

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Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has announced a significant increase in the monetary policy rate, known as the interest rate, to 24.75%.

This move disclosed by CBN Governor Olayemi Cardoso during the 294th Meeting of the Monetary Policy Committee press briefing in Abuja, represents a bold step by the apex bank to address the mounting inflationary pressures faced by the country.

With inflation soaring to 31.70% in February, the CBN aims to moderate this upward trend by tightening its monetary policy stance.

This decision follows the previous hike in the interest rate to 22.75% in February, showcasing the CBN’s commitment to combatting inflationary forces.

While the bank opted to maintain the Cash Reserve Ratio at 45%, the significant increase in the interest rate underscores the urgency of the situation and the need for decisive action.

Governor Cardoso emphasized that these measures are essential to stabilize the economy and safeguard the purchasing power of the Nigerian currency.

The 294th MPC marks the second meeting under Governor Cardoso’s leadership, indicating a proactive approach to addressing economic challenges.

The next MPC meeting is scheduled for May 20th and 21st, 2024, highlighting the ongoing commitment of the CBN to navigate Nigeria’s economic landscape amidst inflationary pressures.

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Economy

Nigeria Braces for 10th Consecutive Interest Rate Hike by Central Bank

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Central Bank of Nigeria (CBN)

As Nigeria grapples with persistently high inflation, the Central Bank of Nigeria (CBN) is gearing up to implement its tenth consecutive interest rate hike in a bid to curb the soaring prices and attract investment.

Analysts surveyed by Bloomberg are anticipating a substantial 125 basis-point increase in the key rate to 24%, marking one of the most significant adjustments in the current tightening cycle.

The decision, expected to be announced by Governor Olayemi Cardoso on Tuesday at 2 p.m. in Abuja, comes on the heels of inflation accelerating to 31.7% in February, far surpassing the central bank’s target range of 9%.

This surge has been primarily attributed to the sharp depreciation of the naira, prompting authorities to devalue the currency twice since June to narrow the gap with the unofficial market rate and encourage investor confidence.

While these measures have seen the naira strengthen in recent days and bolstered investment inflows, including a fourfold increase in overseas remittances and significant foreign investor portfolio asset purchases, there remains a palpable need for more decisive action.

Giulia Pellegrini, a senior portfolio manager at Allianz Global Investors, emphasized the necessity for the CBN to intensify its tightening efforts to regain foreign investors’ confidence in the local bond market.

While acknowledging the positive strides made by the central bank, Pellegrini stressed the importance of a more assertive approach to prevent the diversion of investor attention to other frontier markets.

As the Nigerian economy navigates through these challenging times, the impending interest rate hike signals the CBN’s determination to address inflation head-on and foster a more stable economic environment.

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