The flow of credit from commercial banks to the private sector reduced further in January as it stood at N15.131 trillion year-on-year, data compiled from the Central Bank of Nigeria (CBN) have shown.
The amount represented a decrease by one per cent or N154 billion, as against the N15.285 trillion it was as at December 2012 and also a decline by N293 billion compared to the N15.424 trillion as at November last year.
Analysts maintained that the development was influenced by banks' preference for fixed income instruments.
The fall in credit to private sector as well as the 9 per cent inflation for January, analysts argued might also heighten the agitation for a reduction in the benchmark interest rate as well as a downward adjustment in the cash reserve requirement (CRR) at the next Monetary Policy Committee (MPC) meeting to be held in March.
Also, the central bank's money and credit statistics showed that Narrow Money (M1), which includes all physical monies such as coins and currency along with demand deposits and other assets held by the central bank, reduced to N6.940 trillion in January, as against the N7.067 trillion it was in December.
But broad money (M2), which generally is made up of demand deposits at commercial banks and monies held in easily accessible accounts, climbed to N15.169 trillion in January, from N15.129 trillion in December.
According to the apex bank, currency in circulation stood at N1.457 trillion as at January, just as bank reserves was also N1.775 trillion in the period under review.
Analysts at Renaissance Capital argued that January's sharp slowdown in credit growth implied a downside risk to their 16-17 per cent credit growth projection for 2013.
The financial advisory firm added: "Two consecutive months of month-on-month decline in credit growth, in addition to the slowdown in inflation January, will add to the calls for rate cuts and a downward adjustment in the cash reserve requirement at the March MPC meeting.
"We believe the MPC's view in March on external risks to the oil price, and by implication the naira, will play a significant part in its policy decision. We maintain our projection of a 100 basis points cut in the Monetary Policy Rate to 11 per cent by year end. Recent data releases increase the probability that a rate cut may come as soon as March."
However, Renaissance Capital in a separate report pointed out that if loan growth picks up to 15 to 20 per cent this year, "we would expect better growth. Offsetting this is the pressure on fees, which the CBN is eyeing."
It added: "Most banks were mildly concerned about the removal of ATM fees (smaller banks more than bigger banks), but all were more worried about the potential reduction in Commission on Turnover (CoT) fees.
"To date there has been no official announcement from the CBN on this matter, but it seems to us to be an ongoing area of risk."