LATEST data from the Central Bank of Nigeria (CBN) has shown that total banking industry assets grew year-on-year by N30.92 trillion or 47.21 percent to N96.4 trillion between end-June 2022 and end-June 2023.
Details of the banking industry’s total assets and gross credit to the economy which have maintained their upward trends in the same period formed part of the information contained in the personal statement of the Monetary Policy Committee released at the weekend.
The Monetary Policy Committee (MPC) met in July against the backdrop of slowing global growth prospects owing to geopolitical tensions, high energy prices and continued anti-inflation policy stances.
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Members of the committee comprising the acting governor of CBN, Shonubi Folashodun; Obiora Kingsley L. and Sanusi Aliyu in a review of the banking system stability noted that the banking system continues to remain safe, sound and resilient.
According to them, Capital Adequacy Ratio (CAR) stood at 11.2 percent as of end-June 2023, above the regulatory minimum of 10 percent.
The Non-Performing Loans (NPLs) ratio was 4.1percent, which was below the regulatory maximum of 5percent. Furthermore, Liquidity Ratio stood at 48.4percent, above the regulatory minimum of 30 percent.
However, the members expressed worry that developments in the Monetary Sector indicate rising liquidity in the economy which could undermine the efforts to tame inflation.
Growth in liquidity has arisen from several sources: cash reserve requirement (CRR) normalisation, repayment of matured CBN bills, maturing Federal Government Bonds, Nigerian Treasury Bills (NTBs), and fiscal disbursements to the three tiers of government.
During the period, May to June 2023, the Monetary Base decreased while the Broad Money Supply (M3) increased. Although both were below their provisional benchmarks, growth in liquidity is of concern in a period of tight monetary policy aimed at taming inflation.
According to Shonubi, growth of key monetary aggregates in the review period highlighted the challenge of excess liquidity in the economy.
Annualised growth in broad money supply, at 48.71 per cent vis-à-vis the programmed target of 28.21 percent, was driven by expansion in both net domestic and net foreign assets.
“Overall, increased systemic liquidity in June 2023, on account of higher FAAC allocation, temporary effect of CRR normalisation and sustained increase in banking system credit, were major contributors to liquidity surfeit and expansion of monetary aggregates,” he stated.
Overall, the transmission of monetary policy according to the members must be strengthened to ensure that market indices respond optimally to the bank’s rate adjustments and in line with liquidity profile of the economy.