Broad Money
 Supply Hits N40.37trn Driven by 9.12% Rise in Net Domestic Assets


Eromosele Abiodun
Central Bank of Nigeria (CBN) over the weekend released its
 depository corporations survey which showed a
 7.10 per cent year-to-date (YTD) rise in Broad Money
 Supply (M3 money) to N40.37 trillion as at
 October 2021.
Analysts believe the relatively significant increase
 was due to a 9.12 per cent rise in Net Domestic Assets
 (NDA) to N34.14 trillion.

However, there was a
 1.50 per cent moderation in Net Foreign Assets (NFA) 
to N7.23 trillion which was insufficient to offset
the sharp growth in NDA.

The CBN numbers showed that Net Domestic
 Credit (NDC) rose year-to-date by 11.35 per cent to 
N47.38 trillion in October 2021. Further
breakdown of the NDC showed a 14.46 per cent YTD
 rise in Credit to the Private sector to N34.51
trillion.

Commenting analysts at Cowry Assets said the increase in credit to private sector should further boost economic growth as more people have access to loans at reasonable interest rates, albeit we expect the growth pace to slow in 2022 given the anticipated rise in rate environment.

According to Cowry Assets, “Also, government borrowings increased in the review period as the need to provide basic infrastructure remained pressing amid sustained budget deficit, hence Credit to the Government rose by 3.79 per cent to N12.87 trillion. On the liabilities side, the 7.10 per cent YTD increase in M3 Money was further strengthened by the 9.72 per cent rise in M2 Money to N41.37 trillion, albeit funding by treasury bills moderated YTD to N933.29 billion.

“The increase in M2 was chiefly driven by a 14.21 per cent rise in Quasi Money (near maturing short term financial instruments) to N24.82 trillion. Narrow Money (M1) rose by 3.61 per cent YTD to N16.55 trillion (of which Demand Deposits rose by 3.86 per cent to N14.00 trillion, however currency outside banks decreased by 12.22 per cent to N2.55 trillion). Reserve Money (Base Money) moderated YTD by 2.81 per cent to N12.73 trillion as Bank reserves decreased by 4.18 per cent to N9.77 trillion despite the currency in circulation, which rose by 1.98 per cent to N2.97 trillion.”

Commenting on the 2022 fiscal year budget passed last week by the National Assembly, the analysts said the N17.1 trillion budget is an audacious one, considering the amount of infrastructure that the country needs to support economic growth.

Nevertheless, they added that the N6.9 trillion on recurrent expenditure, as against the N5.4 trillion to be expended on capital projects, appears outrageous in the face of low revenue income.

“The National Assembly finally passed the 2022 fiscal year budget after increasing the estimated bill of N16.39 trillion presented by President Muhammadu Buhari by N800 billion to N17.13 trillion. According to the lawmakers, the 2022 budget was increased to provide more funds to critical sectors in order to execute their core mandate. They include government agencies such as Independent National Electoral Commission (INEC) as it prepares for the 2023 general elections and the National Population Commission (NPC) for the preparation of 2022 proposed Population Census.

“Freshly passed budget by the Senate showed that the executives were more conservative than the legislators as regards expected income from crude oil sales – the National Assembly revised upward the crude oil benchmark to $62 per barrel, as against the $52 per barrel earlier proposed by the President. Other economic variables in the budget such as exchange rate was pegged at N410/$; Gross Domestic Product (GDP) rate at 4.2 per cent and inflation rate at 13 per cent, “they said.

“In 2022, Federal Government would expend N6.9 trillion on recurrent expenditure, N5.4 trillion on capital expenditure, N3.8 trillion on debt servicing and N869.6 billion as statutory transfers. Further breakdown of the recurrent expenditure showed that N996.09 billion was earmarked for Ministry of Defence, Ministry of Police Affairs to get N518.53 billion, Ministry of Health and Ministry of Education to get N462.86 billion and N593.47 billion respectively, “the analysts said.