Nigeria’s net domestic assets (NDA) maintained its positive growth by 9.12 percent in October 2021 to N34.14 billion, as a result of increasing claims on the federal government and other public non-financial corporations, private sector and state and local governments, the communiqué from the recently concluded Central Bank of Nigeria Monetary Policy Committee meeting, the last in 2021, shows.
According to the communique, there were improvements in monetary aggregates as broad money supply (M3) grew by 7.10 percent in October 2021 to N41.37 billion, compared with 4.72 percent in September 2021, which printed N40.45 billion, and this was chiefly driven by growth in net domestic assets (NDA) by 9.12 percent in October 2021, compared with 10.71 percent or N34.6 billion recorded in September 2021.
M3 was traditionally used by economists to estimate the entire money supply within an economy and by governments to direct policy and control inflation over medium and long-term periods.
Consequently, data obtained from the CBN website further show that the total money supply (M2), which includes cash, checking deposits, and easily convertible near money, rose to N41.37 billion in October, from N40.5 billion in the prior month. The net foreign asset (NFA), on the other hand, contracted moderately by -1.50 percent in October to N7.23 billion, compared with -20.85 percent in the preceding month, leaving Nigeria’s total reserve money at N12.73 billion during the review period.
Elsewhere in the financial market, the CBN noted that money market rates oscillated within the standing facilities corridor, reflecting the prevailing liquidity conditions in the banking system. The monthly weighted average Open Buyback (OBB) rate increased to 12.18 percent in October 2021 from 11.11 percent in September 2021, while the monthly weighted average Interbank call rate decreased from 13.21 percent in September 2021, to 10.00 percent in October 2021. The increase in the Open Buyback (OBB) rate, according to the financial sector regulator, reflected the tight liquidity condition in the banking system.
Furthermore, the bank stated that the average non-performing loans (NPLs) ratio in the Nigerian banking industry was above the regulatory limit of five percent as of October 2021, which signals that Nigerian banks still carry bad loans above the regulatory threshold.
However, as Nigerian financial institutions continue to grapple with their bad experience in loans recovery in the face of the lingering economic hardship brought about by the coronavirus pandemic, it appears that the apex bank has provided regulatory forbearance for some commercial banks giving them a softer treatment for loans that are not performing.
While companies have struggled over the years to generate enough cash flows to offset or amortise these debts, industry analysts have estimated that over 89.7 billion in loans have been impaired by about 10 of the tier-1 and tier-2 lenders during the first six months in 2020. In the face of the challenges, the apex bank, through its policy committee members commended itself for maintaining stability in the banking system in the wake of the covid-19 induced economic crisis.
“The MPC noted that the Capital Adequacy Ratio (CAR) and Liquidity Ratio (LR) both remained above their prudential limits at 15.2 and 41.2 percent, respectively. The Non-Performing Loan ratio (NPL) at 5.3 percent in October 2021, reflected progressive improvement, compared with 5.7 percent in October 2020. The Committee, however, urged the Bank to sustain its tight prudential regime to bring the Non-Performing Loan (NPL) ratio below the 5.0 percent prudential benchmark,” the CBN said in its November MPC communiqué.
However, the policy committee further lauded the continued resilience of the banking system in the face of severe shocks to both the domestic and global economies as well as lauding the apex bank for maintaining overall stability in the banking system.
Also, with the increased contribution of the non-oil sector to government revenues, the committee has extolled the gradual diversification of the economy and in turn called for more support to increase non-oil exports as a source of foreign exchange earnings in the economy.
