Total foreign exchange inflows through the Central Bank of Nigeria (CBN) increased by 89.14 percent at the end August this year. The recent data released by the CBN showed that the forex inflows rose from $1,092.21 million recorded in July to $2,065.79 million in August 2016. The increase according to CBN was due mainly to receipts of foreign flows within the month.
Total forex outflows, however, decreased by 4.57 per cent from $2,728.12 million to $2,603.35 during the same period. In direct efforts to deepen the foreign exchange market and stabilize the financial markets generally, CBN has deployed a number of policy instruments in the last two months, including an increase in the benchmark interest rate.
Complementary administrative measures were also taken towards achieving this goal, among which was the directive to IMTOs to sell forex directly to Bureau de Change Operators, in order to improve liquidity in that segment of the foreign exchange market. While challenges still remain in forex market, the Monetary Policy Committee at the last meeting expressed optimism that with the crystallization of current policy measures, noticeable improvements should be observed in the financial markets.
The Committee further noted that the pressure on consumer prices continues to be associated with reform-related legacy and structural factors including high costs of electricity, transport, production inputs, as well as higher prices of both domestic and imported food products.
The MPC expects that with the onset of the harvest season, the restrictive stance of policy as well as the flexible Forex regime, prices will begin to taper in the fourth quarter. Monetary, Credit and Financial Markets the CBN data indicated that Broad money supply (M2) grew by 8.08 per cent in August, 2016, compared with the July level of 10.75 per cent. When annualized, M2 grew by 12.12 per cent in August 2016 above the growth benchmark of 10.98 per cent for 2016. Net domestic credit (NDC) grew by 20.09 per cent in the same period, annualized at 30.14 per cent.
At this rate, the growth rate of NDC was above the provisional benchmark of 17.94 per cent for 2016.
The development in NDC, essentially reflected the relative growth in credit to the private sector of 21.07 per cent in the month, annualized to 31.61 per cent. Credit to government grew by 1.99 per cent in August 2016, which annualized to a growth of 3.0 per cent compared with the growth benchmark of 13.28 per cent. The growth in M2 was traced to exchange rate effect following the depreciation of naira in the second quarter of the year.
Money market interest rates reflected liquidity conditions in the economy.
