WEDNESDAY, 13 OCTOBER 2010 BLESSING ANARO & IHEANYI NWACHUKWU  

Credit to the private sector by the deposit money banks hit N10.1 trillion by June this year, the Central Bank of Nigeria (CBN) said in its current quarterly report. The apex bank said in its second quarterly report: “Compared with the level at the end of the preceding quarter, banking system’s credit to the private sector increased by 0.7 per cent to N10.1 trillion, in contrast to the 1.7 per cent decline at the end of the first quarter”.

Thus, for the first time this year, credit to the private sector came from a decline to an actual growth. The CBN attributed the development to the increase in Deposit Money Banks’ (DMBs) claims on the sector. Over the level at end-December 2009, banking system’s claims on the private sector, however, fell by 1.0 percent. On the other hand, banking system’s credit (net) to the Federal Government, at end of the review quarter, increased by 9.7 percent to negative N1.49 trillion, compared with 28.4 percent in the preceding quarter.

The development was accounted for, largely by the increase in CBN’s holding of Federal Government securities (4.7 percent), reinforced by the decline in Federal Government deposits with the Central Bank. Over the level at end-December 2009, banking system’s claims (net) on the Federal Government rose by 35.3 percent.

This brings the aggregate banking credit to the domestic economy at the end of the second quarter to N8.61 trillion, aggregate banking system credit (net) to the domestic economy at the end of the second quarter rose by 2.7 per cent over the level at the end of the preceding quarter, compared with the increase of 6.1 per cent in the preceding quarter.

The development reflected wholly the rise in net claims on the Federal Government. Over the level at end-December 2009, aggregate banking system credit (net) to the domestic economy rose by 9.0 per cent. At N6.49 trillion, foreign assets (net) of the banking system declined, by 10.6 percent in the second quarter of 2010, compared with the decline of 4.5 percent in the preceding quarter. The development was attributed to the fall in both the CBN and DMBs’ holdings. Over the level at end-December 2009, foreign assets (net) of the banking system fell by 14.6 percent.

Similarly, quasi-money declined by 2.1 percent to N5.93 trillion, in contrast to the increase of 5.1 percent at the end of the first quarter of 2010. The development mirrored the fall in all the components, namely: time, savings and foreign currency deposits of the DMBs.

Other assets (net) of the banking system increased by 8.1 percent to negative N4.25 trillion, compared with 2.2 per cent in the preceding quarter. The rise reflected largely the increase in unclassified assets of the CBN during the quarter.

Source:BusinessDay