7 Significant Elements of the CBN’s Economic Report

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In its usual manner, the Central Bank of Nigeria (CBN) published its quarterly economic report providing an account of the changes in the economy. The Economic Report for the first quarter of 2017 was published on 13th July, 2017. We explore seven data points from the economic report:

  1. Bank assets fall

The foreign asset of Deposit Money Banks falls by 14.8 percent to ₦7.56 trillion; other assets fall by 5.7 percent to negative ₦13.02 trillion. The decline in assets has been attributed to bad debts owed banks, induced by reduced economic activity, decline in oil price, and high inflation rate. The CBN’s Financial Stability Report showed that the ratio of non-performing loan to total loan reached a five-year high of 14 percent.

  1. Banks reduce lending to private sector

At ₦2.23 trillion, lending to private sector declined by 0.4 percent in the first quarter of 2017. This decline is followed by a 1.1 percent decline seen at the end of 2016. With reduced assets, banks are risk averse in lending out to businesses.

  1. M1 Falls

M1 also known as “narrow money” (notes, coins, demand deposits) falls to ₦9.95 trillion, a 12.7 percent decline from the first quarter of 2017. At the end of 2016, narrow money fell by a record level 28.7 percent. The continuous decline in narrow money reflects the economic recession the country faces as money in circulation falls. With interest rate at 16 percent, and reduction in bank lending, M1 is expected to remain low.

  1. Inflation falls

Inflation in the first quarter of 2017 averaged 17.26 percent, a 7 percent decline from 18.6 percent recorded in the previous quarter. The all-items composite Consumer Price Index (CPI) which measures inflation by way of computing the average change in the prices of everyday commodities rose by 4.3 percent to 222.7. However, the effect of the increase in CPI on inflation was tapered off by the interventions of the CBN in the foreign exchange market. These interventions reduced the effect of a weak naira on domestic prices.

  1. NSE All-Share Index declines

The Nigerian Stock Exchange declines by 5.1 percent to close at 25, 516. The decline is credited to the high inflation and interest rate which have reduced economic activity. The fall in commodity prices globally, risk aversion, and uncertainty in the economy have played a part in the decline of the NSE Index as well.

  1. Government revenue lower than budget benchmark

Earning less than we anticipated, the federal government revenue falls by 36.3 percent below 2016 budget benchmark to ₦1.50 trillion. The fall in government revenue is as a result of a fall in both oil and non-oil revenue components.

  1. Government expenditure higher than budget benchmark

Spending more than we budgeted, government expenditure rises by 7.3 percent at ₦1.68 trillion relative to the quarterly budget benchmark. The rise is mainly due to an increase in capital expenditure at 31.7 percent, recurrent expenditure remains high at 63.3 percent.

To read the full report click here

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