Credit to private sector increased to N43.07trn in Q1, 2023 – CBN

Despite economic challenges, political tensions, fuel and naira shortages that slowed down business activities in Q1 2023, credit to the private sector increased an all-time high of N43.07 trillion, with expectations of a further increase in the year.

In contrast, business conditions in the country deteriorated sharply, while prices climbed and borrowing costs hit a new record high.

According to the Central Bank of Nigeria (CBN), lending to the private sector in Nigeria rose to N43.07trillion in the first quarter (Q1) indicating an increase of 3.7 per cent or N1.5trillion in the first quarter of 2023.

The growth rate, the CBN said, was slightly higher than the 3.65 per cent or N1.28trillion increase recorded in Q1 2022.

Although credit growth slowed in January and February 2023, and foreign direct investment decreased in 2022 due to the US dollar shortage, lending to the private sector in Q1 2023 increased by 18.1 per cent or N6.6trillion Year-on-Year (YoY) from N36.5trillion in Q1 2022.

The Deputy Governor, Economic Policy, CBN, Kingsley Obiora, in his personal statement at the first Monetary Policy Committee (MPC) meeting of 2023, attributed the increase to the CBN directive on Loan-to-Deposit Ratio (LDR), which has encouraged banks to increase lending to the real sector of the economy, and business strategy and competition.

According to him, “The increase in credit to the key sectors of the economy is expected to bolster aggregate demand and promote economic growth, job creation, and poverty alleviation.”

Also, the Deputy Governor, Financial System Stability, CBN Aisha Ahmad noted that the financial system has provided significant support for needed domestic economic resilience amidst global shocks and remained strong into 2023.

In the same vein, the money and credit statistics of the CBN revealed that Money supply, known as M2, has risen to all-time high of N54.19trillion in March 2022 as the despite the redesign the current banknotes.

Data from the CBN website showed that money supply, which is the total stock of money circulating in an economy, rose by 2.4percent Month-on-month from N52.92 trillion in February 2023 to N54.19 trillion in March 2023.

The year-to-date, money supply increased by 2.6 per cent from N52.84 trillion in January 2023

Money supply consists of quasi-money, currency outside banks and demand deposits.

A breakdown of the money supply from the data shows that quasi-money – assets that are highly liquid and can easily be converted to cash – went up by 2.74percent year-to-date to N32.84 trillion in March 2023 compared to N31.96 trillion in February this year.

Currency outside banks increased to N1.45trillion in March 2023 from N843.3billion reported by CBN in February 2023.

Demand deposits – money deposited in a bank account that can be withdrawn on demand without advance notice – dropped to N19.91 trillion in March 2023 compared to N20.11 trillion in February this year, representing 1.04 per cent MoM decline.

The increase shows the impact of the Supreme Court Order that returned the old N200, N500, and N1,000 notes into circulation until December 31, 2023.

In addition, currency in circulation hits N1.68 trillion in March 2023, representing a 71per cent rise from N982 billion in February 2023.

The sudden announcement of the redesign project surprised the financial markets, analysts, and even the finance minister, triggering a wave of uncertainty and heightening speculative activity against the naira in the parallel market as many hoarders rushed to offload their naira stockpiles.