Aggregate net credit by banks to the domestic economy fell in the second quarter by 2.7 per cent to N13.31tn, as against the marginal decline of 0.1 per cent at the end of the preceding quarter.

Latest report released by the Central Bank of Nigeria showed that the decline in the aggregate banking system credit relative to the preceding quarter’s level reflected, largely, the substantial decline in net credit to the Federal Government, which dampened the effect of the increase in claims on the private sector.

The report showed that banking system’s claims on the Federal Government, at the end of the review quarter, declined by 213.2 per cent to negative N1.38tn, compared to a decline of 11.3 per cent in the preceding quarter. The development, according to the report, was accounted for largely by the decline in the banking system’s holding of government securities, particularly Treasury Bills and bonds. 

The Federal Government, however, remained a net lender to the banking system at the end of the review quarter.

The report said, “At the end of second quarter 2012, banking system’s credit to the private sector rose by 4.1 per cent to N14.69tn, in contrast to the decline of 0.4 per cent at the end of the first quarter of 2012. The development was attributed, wholly, to the 3.9 per cent increase in claims on the core private sector.

 ÃƒÂ¢Ã¢â€šÂ¬Ã…“At N7.53tn, net foreign assets of the banking system rose by 3.0 per cent at the end of the review quarter, compared with 2.4 per cent at the end of the preceding quarter. The rise in net foreign assets was attributed, wholly, to the increase in CBN’s holdings.”

At the end of the review quarter, other assets (net) of the banking system declined by 4.7 per cent to negative N 7.35tn, compared with the decline of 2.6 and 10.4 per cent at the end of the preceding quarter and the corresponding quarter of 2011, respectively. 

The development reflected, largely, the fall in unclassified assets of the CBN. The report showed that currency in circulation fell by 4.8 per cent at the end of the second quarter of 2012 to N1.36tn, compared with the decline of 8.5 per cent at the end of the preceding quarter.

The development was attributed, largely, to the decline in currency outside banks by 12.6 per cent during the quarter under review. Total deposits at the CBN amounted to N6.47tn, indicating an increase of 15.7 per cent, in contrast to a decline of 7.1 per cent at the end of the preceding quarter.

Source: Punch/ Ademola Alawiye