Jul 8, 2010

 

Credit to the  private sector will  remain muted for much of the third quarter of the year, says Afrinvest Limited. The Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) on Monday stated that in the month of May, “While credit to the government grew substan-tially by 50.87%, credit to the private sector declined by 1.88%; this reflects the risk aversion of the DMBs in lending to non-government borrowers.”

 

Afrinvest, however, predicted that credit to private sector will remain stagnant in the third quarter.“The CBN has remained focused on providing credit to the private sector. We expect to see modest growth in aggregate domestic credit, driven mostly by growth in credit to government, while credit to the private sector will remain muted for much of Q3 ’10,” the company said in  a newsletter to investors on Tuesday.

 

“This can be seen in the 1.9% decline in credit to the private sector in May, 2010, following the 6.8% contraction as at March 2010.“We also expect other macroeconomic variables, such as lending rates, to trend downwards slightly with the release of statutory revenue in the last week of May 2010, while exchange rates moderate at current levels. Inflation is expected to stabilize and subse-quently trend upwards going into Q4 ’10″, it said.

 

A communiqué issued by the MPC stated, “The Committee observed that the impressive output growth recorded in 2009 continued in 2010. Provisional data from the National Bureau of Statistics (NBS) indicates that real Gross Domestic Product (GDP) grew by 7.23 per cent in the first quarter of 2010 up from 4.50 per cent recorded in the first quarter of 2009. GDP was projected to grow by 7.68, 7.76 and 8.13 per cent in the  second, third and fourth quarters of 2010, respectively. Overall GDP growth for 2010 is projected at 7.74 per cent which is higher than the revised figure of 6.66 per cent recorded in 2009.

 

‘The non-oil sector is expected to remain the main driver of overall growth, with agriculture, wholesale and retail trade, and services contributing 2.49, 2.03 and 2.11 per cent, respectively. The Committee believes that the impressive growth forecasts reflected prospects for moderate rainfall in 2010, which is expected to support the production of major crops across the country, coupled with the current peace in the Niger-Delta, which has mitigated the decline in crude oil and natural gas production. It however cautioned that there is a thick cloud hanging over commodity producing countries because of the current crisis facing the Euro Area and emerging slowdown in manufacturing in major Asian countries and the US.

 

In addition, the Committee highlighted the binding constraints on the domestic economy namely; infrastructure inadequacy, lack of access to finance, lack of requisite skills, unfavourable trade policy and investment climate, which has the potential to constrain economic growth.

 

(Source:Vanguard)