In spite of the tight liquidity which permeated the financial system during the year, banks have increased their intervention in the domestic economy with a massive rise in their credit to the private sector in the last one year.
Economic data for the month of November 2012 released by the Central Bank of Nigeria (CBN) indicated that banks' credit to the private sector increased by 24.2 per cent, or N15.4 trillion, as at November compared to the N12.4 trillion recorded in November 2011.
The data also indicated that key financial sector indicators recorded major improvements, which pointed to a general wellbeing in the financial system.
For instance, Net Foreign Assets of banks increased from N6.62 trillion in 2011 to N8.73 trillion as at November 2012, making an increase of 31.9 per cent, even as Broad and Narrow Money rose by 23.44 and 19.24 per cents to N15.06 trillion and N6.88 trillion in 2012 compared to N12.2 trillion and N5.77 trillion respectively in 2011.
Also on the rise is currency in circulation which rose marginally by 2.87 per cent from N1.39 trillion as at November 2011 to N1.42 trillion in 2012, while currency outside banks also recorded a marginal increase from N1.07 trillion in 2011 to N1.14 trillion in 2012, both indicative of the positive impact of the Cashlite policy of the CBN on the level of cash in the system.
This November data also a marked significant improvement in the month by month data released by the CBN within the year as economic report as at August had indicated that growth in money supply remained sluggish at the end of August 2012.
Broad money supply (M2), at N13.76 trillion, rose by 2.8 per cent in the month-on-month basis, in contrast to the decline of 0.7 per cent at the end of the preceding month. According to the CBN, the development was accounted for, largely, by the 3.3 and 0.5 per cent growth in foreign assets (net) and domestic credit (net) of the banking system, respectively.
Over the level at end-December 2011, M2 grew by 3.5 per cent, driven by the growth of 13.0 and 0.8 per cent in foreign assets (net) and other assets (net) of the banking system, respectively, which more than offset the 3.8 per cent fall in domestic credit (net) of the banking system.
Narrow money supply (M1), at N6.24 trillion, declined by 2.5 per cent on a month-on-month basis, below the level at the end of the preceding month. The development was accounted for, largely, by the 3.1 per cent fall in its demand deposit component.
Relative to the level at end-December 2011, M1 declined by 7.8 per cent, reflecting, largely, the 13.2 and 6.6 per cent fall in its currency outside banks and demand deposits components.