Thursday, March 08, 2018/ 10:22
AM / CBN
Global output growth was projected at 3.5 per cent
in 2017, compared with 3.2 per cent recorded in 2016. The key drivers of the
increase in growth included the strengthening of financial markets and expected
recovery in manufacturing and trade. Inflationary pressures were sustained
across the globe due to rise in the prices of raw materials and a recovering
Global consumer price inflation rose due to
increases in energy and consumer prices in advanced economies. Stock markets
recorded mixed performance across countries, while major currencies showed
mixed trends against the US dollar. Most of the central banks surveyed in the
report kept their monetary policy rates fairly stable during the first half of
On the domestic front, the economy gradually
recovered from the recession that had persisted since the second quarter of
2016, as gross domestic product grew by 0.55 per cent in the second quarter of
2017. The improvement was attributed to the rebound of activities in the services
and agricultural sectors, as well as increased patronage of locally
Furthermore, inflationary pressures started easing
during the first half of 2017 as the headline inflation (year-on-year) declined
to 16.10 per cent in June 2017 from 18.55 per cent at end-December 2016.
External reserves increased by US$3.35 billion in
the first half of 2017 to US$30.34 billion, while the naira maintained a fairly
stable exchange rate in the foreign exchange market.
The tight monetary policy stance maintained in the
review period resulted in a contraction of most of the major monetary
aggregates. Relative to the level at end-December 2016, broad money supply, M2,
fell by 7.33 per cent at end-June 2017. Net aggregate credit to the economy
rose marginally to N26,921.03 billion at end-June 2017, reflecting the increase
in net claims on the Federal Government, which grew by 5.91 per cent.
The banking system’s credit to the private sector
fell marginally by1.47 per cent to N15,907.47 billion from the position at
end-December 2016. The oil and gas sector remained the sector with the highest
share of credit at 29.29 per cent. The contribution of manufacturing,
construction, and power and energy sub-sectors to total credit increased.
Reserve money declined by 6.76 per cent in the review period, though it was
higher than the second quarter indicative benchmark by 0.6 per cent. The
decline in reserve money reflected the decline observed in net domestic assets
and net foreign assets.
Interest rates varied in line with liquidity
conditions. The average short-term money market rates traded mostly above the
MPR of 14.00 per cent. Most of the key rates in the first half of 2017 were
higher than their levels in the second half of 2016.
Short-term maturities maintained dominance in the
credit market, though their share of total credit declined. Similarly, banks’
short-term deposits (below one year) constituted a very significant portion of
the total. The low concentration ratios observed in the banking industry showed
a trend towards more competition across the banks.
In the OFI segment of the banking industry, 167
institutions were licensed in the first half of 2017. This was to further
enhance financial inclusion among the populace. Key financial indicators for
OFIs showed an increase in total assets, net loans and advances, deposits and
The Bank maintained its contractionary monetary
policy stance in the first half of 2017 as it retained its monetary policy rate
at 14.00 per cent. Money market rates closed high at the inter-bank market with
the overnight call and open buy back (OBB) rates trading significantly above
the upper bound of the MPR corridor for most of the first half of 2017.
In the capital market, the Nigerian Stock Exchange
All Share Index (NSEASI) and market capitalization both increased due to
improved confidence in the market and gradual economic recovery. Total bonds
outstanding increased in the first half of 2017 by 2.96 per cent. The Bank continued
to play a developmental role by providing key interventions to bridge the
financing gap in some segments of the real sector.
In the banking industry, the asset quality of
commercial banks deteriorated in the first half of 2017 as the ratio of non-performing
loans to gross loans increased, compared with the level at end-December 2016.
This led to a slight capital deterioration and a decline in earnings
indicators. To test the resilience of the industry, a stress test was conducted
on the banks. The test showed that the capital adequacy ratio of the banks
deteriorated when the most severe shocks were applied. It also showed that
liquidity shortfalls will only occur when the most severe shocks of a
cumulative 30-day run were applied.
Supervisory activities of the Bank in the review
period included the examination of banks and OFIs in conjunction with the NDIC,
ongoing implementation of enhanced supervisory standards for the domestic
systemically important banks (D-SIBs) and preparation for the implementation of
IFRS 9 starting January 2018. The Bank, under the auspices of the FSRCC,
commenced consolidated examinations of the three financial holding companies in
the review period.
The Bank continued to collaborate with both
domestic and international institutions to strengthen the AML/CFT regulatory
The Banking Sector Resolution Cost Trust Fund
(BSRCTF) realized a total collection of N190.89 billion in the review period.
The fund is to be applied to the redemption of the outstanding bonds of the
Asset Management Corporation of Nigeria, (AMCON).
To ensure that consumers of financial services are
treated fairly by the banks, the CBN conducted compliance checks on banks’
compliance with the various consumer protection regulations, especially the
Guide to Bank Charges. The report of the examination showed reasonably high
compliance levels. Non-compliant banks were directed to implement specific
remedial actions, including making refunds where applicable. The Bank continued
its consumer education engagements to enhance financial literacy among the
Following the approval of the roadmap for the
Nigerian Sustainable Finance Principles (NSFP) by the Financial Services
Regulation Coordinating Committee (FSRCC) in 2016, each member agency
established a steering committee to coordinate the development of
sector-specific sustainability principles and guidelines.
The FSRCC conducted an investigation of the
activities of ‘Mavrodi Mondial Moneybox’ (MMM) and other Ponzi schemes and
recommended the immediate shutdown of the websites of the illegal fund
The moderate recovery of the domestic output
growth, sustained decline in inflation rate, stability in the exchange rate and
the gradual accretion to external reserves are expected to improve economic
performance. In the medium to long-term, the implementation of the National
Economic Recovery and Growth Plan and the Executive Orders are further expected
to spur economic activities.
Full Report Here
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