Central Bank of Nigeria (CBN) has expressed concern over the sudden surge in domiciliary account balances, saying that it might offset the gains from imposing 75 per cent cash reserve requirement (CRR) on public sector funds.
A statement issued by the CBN signed by Acting Governor of CBN, Sarah Alade after monetary policy meeting also said that the pressure on external reserves was deemed to be consistent with the seasonal annual payment of dividends to foreign investors.
The statement said that the recent pressure in the foreign exchange market was in response to key developments in the US over the Fed’s unwinding of its assets purchase programme.
On a positive note, it said inflation forecasts indicate that food inflation may not grow beyond current levels, especially with bumper harvests expected in 2014 while core inflation could rise.
The statement noted that frontier markets were positioning themselves to attract higher capital inflows by raising their policy rates to contain inflation and also remain competitive, adding that oil prices remained relatively high while production was improving, and there were signs of accretion to external reserves.
According to the CBN the broad money supply (M2) contracted by 2.24 per cent in February 2014 over the level recorded at end-December 2013, but on annualised basis, it translated to a contraction of 13.42 per cent as against a growth target of 15.52 per cent for fiscal 2014.
The Net domestic credit grew marginally by 0.86 per cent in February 2014, indicating an annualised growth rate of 5.15 per cent.
The statement said that the annualized growth in net domestic credit is significantly lower than the provisional benchmark of 28.5 per cent for fiscal 2014. It said” the sluggish growth in aggregate credit was traced mainly to the decline in Federal Government, borrowing which contracted by 2.02 per cent in February 2014 or 12.14 per cent on an annualized basis.”. Reviewing the performance of the nation’s economy the CBN said in 2013, Gross Domestic Product (GDP) grew at an estimated 6.89 per cent, up from 6.58 per cent recorded in 2012. In line with recent trends, it said that the non-oil sector continued to be the main driver of growth in In the fourth quarter, 2013 as it recorded 8.76 per cent.
The apex bank stated that the growth drivers in the non-oil sector in the last quarter, 2013 remained wholesale and retail trade, agriculture and telecommunications which contributed 2.57, 2.27 and 1.97 percentage points, respectively.
Based on the 2013 favourable performance, it said that output growth has been projected at 7.7 per cent for fiscal 2014.