CBN Publishes May 2017 Economic Report

Summary
Despite the tight monetary monetary policy
stance, growth in the major monetary
aggregates increased in May 2017, relative
to the level at end-April 2017. On month-
on-month basis, broad money supply (M2),
at N21,975.34 billion, rose by 1.2 per cent
due, mainly, to the 17.5 per cent increase
in net foreign assets of the banking system.

Over the level at end-December 2016,
however, M2 fell by 6.0 per cent, reflecting
the 7.4 per cent and 6.7 per cent decline in
other assets (net) and net foreign assets of
the banking system, respectively. Similalry,
narrow money supply (M1), rose by 4.4 per
cent, on month-on-month basis, due to
increase in its demand deposits component.

Reserve money (RM), fell by 6.2 per cent to
N5,499.2 billion at the end of the review
month, reflecting the fall in both currency
and bank reserves. Banks’ deposit rates
generally trended downward, while lending
rates rose in May 2017.

With the exception of the 7-day deposit
rate, which rose above the levels in April
2017, all other deposit rates of various
maturity fell from a range of 8.48 per cent
– 13.08 per cent in the preceding month to
7.53 per cent – 11.33 per cent in May 2017.

The average savings and term deposit rates
fell to 4.08 per cent and 8.65 per cent from
4.24 per cent and 9.10 per cent,
respectively, in the preceding month. The
average prime and maximum lending rates
rose by 0.14 percentage point and 0.44
percentage point to 17.58 per cent and
30.75 per cent, respectively, at end-May
2017.
Consequently, the spread between the
average term deposit and the maximum
lending rates widened by 0.89 percentage
point to 22.10 percentage points at end-May
2017. Similarly, the spread between the
average savings deposit and maximum
lending rates, widened by 0.16 percentage
point to 26.43 percentage points at the end
of the review month.

The total value of money market assets
outstanding at end-May 2017 stood at
N11,540.84 billion, showing an increase of
1.6 per cent, as against the 3.3 per cent
decline in the preceding month.

The development was attributed to the 1.4
and 1.7 per cent increase in FGN Bonds
and commercial paper outstanding,
respectively. Gross Federally-collected
revenue (gross) in May 2017 was estimated
at N458.42 billion.

This was lower than the receipt in April
2017 by 13.4 per cent, reflecting decline in
both oil and non-oil revenue components.
Oil and non-oil receipts (gross), at N238.09
billion and N220.33 billion, respectively,
constituted 51.9 per cent and 48.1 per cent
of total revenue.

Federal Government retained revenue and
estimated expenditure for May 2017 were
N185.58 billion and N583.32 billion,
respectively, resulting in an estimated
deficit of N397.74 billion. Agricultural
activities in May 2017 were dominated by
planting of crops, legumes and harvesting
of vegetables.
In the livestock subsector, farmers
continued with the breeding of poultry and
migration of cattle from the Northern states
to the Southern states in search of greener
pastures. Domestic crude oil production
was estimated at 1.63 mbd or 50.53 million
barrels (mb) in May 2017.
Crude oil export was estimated at 1.18 mbd
or 36.58 mb in the review month. The
average spot price of Nigeria’s reference
crude oil, the Bonny Light (37° API) fell to
US$51.20 per barrel in May 2017 from US
$52.89 per barrel recorded in April 2017,
representing a decline of 3.20 per cent.
The end-period headline inflation (year-on-
year), was 16.3 per cent in May 2017,
compared with 17.2 per cent in April 2017.
On twelvemonth moving average basis,
headline inflation was 17.6 per cent in May
2017.

Foreign exchange inflow and outflow
through the CBN in May 2017 were US$2.26
billion and US$3.02 billion, respectively,
and resulted in a net outflow of US$0.76
billion. Aggregate foreign exchange flow
through the economy, however, resulted in
net inflow of US$2.60 billion in the review
month.

Foreign exchange sales by the CBN to the
authorised dealers amounted to US$2.64
billion and represented a 70.8 per cent
increase above the level in April 2017. The
average exchange rate of the naira at the
inter-bank segment, at N305.54 per US
dollar, appreciated by 0.2 per cent,
compared with the level in the preceding
month, but depreciated by 35.5 per cent,
relative to the level in the corresponding
period of 2016.

Other major international economic
developments and meetings of importance
to the domestic economy during the review
month included: the 2017 Association of
African Central Banks (AACB) continental
Seminar held in Accra, Ghana from May
3-5, 2017 and the Mid-Year Statutory
meeting of the Economic Community of
West African states (ECOWAS) held at
Monrovia, Liberia from May 25 – June 4,
2017.

Monetary and Credit Developments
Growth in broad money supply (M2) rose in
May 2017. Banks’ deposit rates trended
downward, while lending rates trended
upward. The value of money market assets
outstanding rose, owing, largely, to the
increase in FGN Bonds and commercial
paper, respectively.

Activities on the Nigerian Stock Exchange
(NSE) were bullish in the review month.
Monetary Policy remained restrictive
during the review month with the
monetary policy rate at 14.00 per cent. On
monthon-month basis, net domestic credit
and other assets (net) of the banking
system fell by 2.5 and 2.4 per cent,
respectively.

Net foreign assets, however, grew
significantly by 17.5 per cent, reflecting
increase in foreign asset holdings by both
banks and the monetary authority.

Consequently, on monthon-month basis,
broad money supply (M2) rose by 1.2 per
cent to N21,975.34 billion in the review
period, compared with the growth of 1.6
per cent at the end of the corresponding
period of 2016, but was in contrast to 1.4
per cent decline at the end of the
preceding month.

Similarly, narrow money supply (M1) rose
by 4.4 per cent to N10,184.90 billion,
reflecting the 6.3 per cent increase in
demand deposits, which more than offset
the 5.4 per cent fall in its currency
component (Figure 1, Table 1)

Over the level at end-December 2016,
money supply (M2) fell by 6.0 per cent in
May 2017, compared with the decline of 7.2
per cent at end-April 2017, but was in
contrast to the 5.0 per cent increase at the
end of the corresponding period of 2016.

The development reflected the 6.7 per cent
and 7.4 per cent decline in foreign assests
(net) and other assets (net) of the banking
system, respectively. Similarly, narrow
money supply (M1) fell by 8.0 per cent,
compared with the decline of 11.8 per cent
at the end of the preceding month and
reflected increase in its currency and
demand deposit components .

Quasi-money fell by 1.4 per cent to N11,
790.44 billion at endMay 2017, compared
with the decline of 1.0 and 2.3 per cent at
the end of the preceding month and the
corresponding period of 2016, respectively.

The development was due to the fall in
time and savings deposit of banks. Over the
level at end-December 2016, quasi money
declined by 4.3 per cent, compared with
the decline of 3.0 per cent and 1.1 per cent
at the end of the preceding month and the
corresponding period of 2016, respectively.
Brandspurng

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