Currency outside banks increased by 24% on huge cash withdrawals —FBNQuest

Fresh facts have emerged that Nigerians stepped up their withdrawals of cash because of fears of another lockdown, thereby leading to increased currency outside banks  by about 25.4 per cent year on year  (y/y) in November 2020 to NGN2.26 trillion.

According to FBNQuest Research, the difference between measures of money supply consists mostly of CBN bills with money holding sectors. It has narrowed sharply this year although since end-November the CBN has announced the issuance of new special bills.

Meanwhile, net domestic credit to the private sector increased by 11.1 per cent y/y to N29.34 trillion at end-November, according to the CBN. Its rate of growth remains double-digit, yet has slowed for four successive months. The data cover lending by the entire banking system and not merely the deposit money banks (DMBs), which represent around 65 per cent of the total figure.

The balance consists of loans from the Bank of Industry and other state-owned development banks, not forgetting the CBN itself in its expanding developmental role.

The firm noted that the slowing rate of growth in private-sector credit extension (PSCE) is such that DMBs have increasingly complied with the minimum 65 per cent threshold for the loan-to-deposit ratio set by their regulator (the CBN).

The apex bank had put gross credit from the banking industry, which “we take to be the DMBs, at N19.54 trillion on 13 November 2020, compared with N19.33 trillion at end-August and N15.56 trillion at the start of the CBN’s tighter loan-to-deposit policy in May 2019.

“This slowdown in lending expansion by the DMBs seems to bear out our explanation of increased compliance with the policy,” the firm stated.

The MPC also noted that the main beneficiaries of the N3.98 trillion increase since May 2019 were general commerce (N870 billion), manufacturing (N740 billion), and agriculture and forestry (N300 billion).

“We hear much about the ‘crowding out’ of the private sector. We see from the CBN’s broader money and credit statistics that credit to government (from all lenders and not only the DMBs) represented 26.9 per cent of total credit to all parties in November 2020, compared with 25.6 per cent one year earlier and 11.4per cent in November 2018,”  FBNQuest observed.

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