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CBN Publishes May 2017 Economic Report

Proshare

Wednesday, July 19, 2017/3:00 PM/CBN

Summary
Despite the tight monetary monetary policy stance, growth in the major monetary aggregates increased in May 2017, relative to the level at end-April 2017. On month-on-month basis, broad money supply (M2), at N21,975.34 billion, rose by 1.2 per cent due, mainly, to the 17.5 per cent increase in net foreign assets of the banking system.

Over the level at end-December 2016, however, M2 fell by 6.0 per cent, reflecting the 7.4 per cent and 6.7 per cent decline in other assets (net) and net foreign assets of the banking system, respectively. Similalry, narrow money supply (M1), rose by 4.4 per cent, on month-on-month basis, due to increase in its demand deposits component.

Reserve money (RM), fell by 6.2 per cent to N5,499.2 billion at the end of the review month, reflecting the fall in both currency and bank reserves. Banks’ deposit rates generally trended downward, while lending rates rose in May 2017.

With the exception of the 7-day deposit rate, which rose above the levels in April 2017, all other deposit rates of various maturity fell from a range of 8.48 per cent - 13.08 per cent in the preceding month to 7.53 per cent – 11.33 per cent in May 2017.

The average savings and term deposit rates fell to 4.08 per cent and 8.65 per cent from 4.24 per cent and 9.10 per cent, respectively, in the preceding month. The average prime and maximum lending rates rose by 0.14 percentage point and 0.44 percentage point to 17.58 per cent and 30.75 per cent, respectively, at end-May 2017.

Consequently, the spread between the average term deposit and the maximum lending rates widened by 0.89 percentage point to 22.10 percentage points at end-May 2017. Similarly, the spread between the average savings deposit and maximum lending rates, widened by 0.16 percentage point to 26.43 percentage points at the end of the review month.

The total value of money market assets outstanding at end-May 2017 stood at N11,540.84 billion, showing an increase of 1.6 per cent, as against the 3.3 per cent decline in the preceding month.

The development was attributed to the 1.4 and 1.7 per cent increase in FGN Bonds and commercial paper outstanding, respectively. Gross Federally-collected revenue (gross) in May 2017 was estimated at N458.42 billion.

This was lower than the receipt in April 2017 by 13.4 per cent, reflecting decline in both oil and non-oil revenue components. Oil and non-oil receipts (gross), at N238.09 billion and N220.33 billion, respectively, constituted 51.9 per cent and 48.1 per cent of total revenue.

Federal Government retained revenue and estimated expenditure for May 2017 were N185.58 billion and N583.32 billion, respectively, resulting in an estimated deficit of N397.74 billion. Agricultural activities in May 2017 were dominated by planting of crops, legumes and harvesting of vegetables.

In the livestock subsector, farmers continued with the breeding of poultry and migration of cattle from the Northern states to the Southern states in search of greener pastures. Domestic crude oil production was estimated at 1.63 mbd or 50.53 million barrels (mb) in May 2017.

Crude oil export was estimated at 1.18 mbd or 36.58 mb in the review month. The average spot price of Nigeria’s reference crude oil, the Bonny Light (37° API) fell to US$51.20 per barrel in May 2017 from US$52.89 per barrel recorded in April 2017, representing a decline of 3.20 per cent.

The end-period headline inflation (year-on-year), was 16.3 per cent in May 2017, compared with 17.2 per cent in April 2017. On twelvemonth moving average basis, headline inflation was 17.6 per cent in May 2017.

Foreign exchange inflow and outflow through the CBN in May 2017 were US$2.26 billion and US$3.02 billion, respectively, and resulted in a net outflow of US$0.76 billion. Aggregate foreign exchange flow through the economy, however, resulted in net inflow of US$2.60 billion in the review month.

Foreign exchange sales by the CBN to the authorised dealers amounted to US$2.64 billion and represented a 70.8 per cent increase above the level in April 2017. The average exchange rate of the naira at the inter-bank segment, at N305.54 per US dollar, appreciated by 0.2 per cent, compared with the level in the preceding month, but depreciated by 35.5 per cent, relative to the level in the corresponding period of 2016.

Other major international economic developments and meetings of importance to the domestic economy during the review month included: the 2017 Association of African Central Banks (AACB) continental Seminar held in Accra, Ghana from May 3-5, 2017 and the Mid-Year Statutory meeting of the Economic Community of West African states (ECOWAS) held at Monrovia, Liberia from May 25 – June 4, 2017.

Monetary and Credit Developments

Growth in broad money supply (M2) rose in May 2017. Banks’ deposit rates trended downward, while lending rates trended upward. The value of money market assets outstanding rose, owing, largely, to the increase in FGN Bonds and commercial paper, respectively.

Activities on the Nigerian Stock Exchange (NSE) were bullish in the review month. Monetary Policy remained restrictive during the review month with the monetary policy rate at 14.00 per cent. On monthon-month basis, net domestic credit and other assets (net) of the banking system fell by 2.5 and 2.4 per cent, respectively.

Net foreign assets, however, grew significantly by 17.5 per cent, reflecting increase in foreign asset holdings by both banks and the monetary authority. Consequently, on monthon-month basis, broad money supply (M2) rose by 1.2 per cent to N21,975.34 billion in the review period, compared with the growth of 1.6 per cent at the end of the corresponding period of 2016, but was in contrast to 1.4 per cent decline at the end of the preceding month.

Similarly, narrow money supply (M1) rose by 4.4 per cent to N10,184.90 billion, reflecting the 6.3 per cent increase in demand deposits, which more than offset the 5.4 per cent fall in its currency component (Figure 1, Table 1).

Over the level at end-December 2016, money supply (M2) fell by 6.0 per cent in May 2017, compared with the decline of 7.2 per cent at end-April 2017, but was in contrast to the 5.0 per cent increase at the end of the corresponding period of 2016.

The development reflected the 6.7 per cent and 7.4 per cent decline in foreign assests (net) and other assets (net) of the banking system, respectively. Similarly, narrow money supply (M1) fell by 8.0 per cent, compared with the decline of 11.8 per cent at the end of the preceding month and reflected increase in its currency and demand deposit components .

Quasi-money fell by 1.4 per cent to N11, 790.44 billion at endMay 2017, compared with the decline of 1.0 and 2.3 per cent at the end of the preceding month and the corresponding period of 2016, respectively.

The development was due to the fall in time and savings deposit of banks. Over the level at end-December 2016, quasi money declined by 4.3 per cent, compared with the decline of 3.0 per cent and 1.1 per cent at the end of the preceding month and the corresponding period of 2016, respectively.




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