LATEST data from the Central Bank of Nigeria (CBN) has shown that the currency outside banks rose by 0.70 per cent in April to N1.90 trillion as Demand Deposits increased by 5.57 per cent to N9.68 trillion,
Similarly, Nigerian savers gave their banks a total of N8.6 trillion to keep in various demand deposit accounts across the country by end of March.
The surplus cash left in the vaults of the banks is being linked to a quiet month in which activities and spending were tempered by a ravaging coronavirus (COVID-19) pandemic that had created fear and panic and consequently led to a lockdown of the economy whereby access to banking halls and facilities was strained.
The 25 banks therefore had a combined demand deposit portfolio of N8.6 trillion at the end of March 2020, up from the N8.1 trillion recorded in February.
Demand deposits are the cheap retail funds in the vaults of banks in the form of savings and current accounts as against fixed deposits.
Bankers believe that the figures above could have been higher but for the upward review of the cash reserve ratio by the Central Bank of Nigeria from 22.5 percent to 27.5 percent in January 2020. The cash reserve ratio is the share of a bank’s total deposit that is mandated by the CBN to be maintained with it in the form of liquid cash.
The CRR is used by the CBN to ensure that a part of deposit money banks’ cash is with the central bank and is hence, secure.
Meanwhile, in the just concluded week, the CBN depository corporations survey (DCS) showed a 0.19 per cent month-on-month (m-o-m) rise in Broad Money Supply (M3 money) to N35.70 trillion in April 2020.
This resulted from a 1.87 per cent increase in Net Domestic Assets (NDA) to N29.78 trillion but partly offset by a 7.52per cent decrease in Net Foreign Assets (NFA) to N5.92 trillion.
Further breakdown showed a 7.1 per cent m-o-m increase in Credit to the Government to N10.43 trillion and a 1.51 per cent rise in Credit to the Private sector to N28.67 trillion.
On the liabilities side, CBN said the 0.19 per cent m-o-m increase in M3 Money was driven by the 2.97 per cent m-o-m increase in M2 Money to N31.76 trillion, but was partly neutralised by a 17.74per cent fall in treasury bills held by money holding sector to N3.94 trillion.
“The increase in M2 was propelled by a 1.98 per cent rise in Quasi Money (near maturing short term financial instruments) to N20.18 trillion and a 4.74per cent increase in Narrow Money (M1) to N11.59 trillion (of which Demand Deposits increased by 5.57 per cent to N9.68 trillion, and currency outside banks, rose by 0.70 per cent to N1.90 trillion).
Analysts expect credit to private sector and government to rise further in the coming months amid CBN palliative measures and the planned huge borrowing by FG. These, in addition to the current planting season and the planned increase in electricity tariff in July, would put pressure on food and non-food prices going forward, they warned.
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