Money supply grew at a slow pace of 0.8 per cent in September to N12.6tn with an annualised growth of 13.1 per cent in money supply compared to the target of 25 per cent.

Information made available by the Fianacial Derivatives Company Limited also showed that narrow money supply, which is also referred to as M1, grew by 2.2 per cent to N6tn in the month of September. Demand deposits, however, rose significantly by 3.7 per cent to N4.99tn in September and by 14 per cent year on year.

The increase, according to analysts, was partly explained by the decline of 2.6 per cent in currency in circulation. Credit to the private sector also grew at a much subdued pace of 2.1 per cent in September as the cost of borrowing spiked to record levels. Analysts at FDC said the impact of the slow growth in money supply was felt in the money markets in October as interest rates remained relatively high.They added that the slow growth in money supply could be attributed to the increase in the benchmark interest rate which squeezed liquidity out of the market during the month.

The analysts said, “In the first two weeks of November, the naira depreciated by three per cent in the official market and by 1.2 per cent at the inter-bank market to trade at N154.5 and N159.3 to the dollar respectively. The dollar/ naira exchange rate was volatile during October. The naira gained 2.9 per cent in October to trade at N150.05 per dollar at the official market.

“The domestic currency also traded outside the official band of the CBN earlier in early October as demand pressures heightened. It weakened by 0.62 per cent at the parallel market to close trade at N162 per dollar having slid to N166 per dollar earlier in the month at the parallel market.” 

Source: Punch/ Ademola Alawiye