The Central Bank of Nigeria’s (CBN) depository corporations survey, released during the week, showed a 1.73% m-o-m increase in Broad Money to N25.71 trillion in October 2018. This resulted from a 6.10% m-o-m increase in Net Domestic Assets (NDA) to N16.38 trillion which offset a 0.43% m-o-m decrease in Net Foreign Assets (NFA) to N18.74 trillion.
On domestic asset creation, the increase in NDA resulted from an increase of 2.55% in Net Domestic Credit (NDC) to N26.63 trillion which was accompanied by 2.67% m-o-m fall in Other Liabilities (net) to N10.25 trillion.
Further breakdown of the NDC showed a 14.60% m-o-m rise in Credit to the Government to N3.90 trillion as well as an increase of 0.70% in Credit to the Private sector to N22.72 trillion. On the liabilities side, 1.73% m-o-m rise in Broad Money Supply was driven by 4.20% m-o-m growth in Narrow Money to N11.13 trillion (as Demand Deposits which rose by 4.94% to N9.52 trillion was accompanied by a 0.01% rise in currency outside banks to N1.61 trillion); however, Quasi Money (near maturing short term financial instruments) fell by 0.08% m-o-m to N14.58 trillion.
Reserve Money (Base Money) increased m-o-m by 7.74% to N7.33 trillion as Bank reserves and Currency in circulation rose m-o-m by 10.97% and 1.54% to N5.02 trillion and N1.96 trillion respectively. Meanwhile, CBN also released its Purchasing Managers’ Index (PMI) survey report for November 2018, which showed faster expansions in both manufacturing and non-manufacturing sectors.
The faster expansion rate in the manufacturing sector was driven by stronger customer demand despite the increase in selling prices, to 51.9 (from 51.2). According to the survey, the manufacturing composite PMI stood at 57.9 index point in November 2018 (higher than 56.8 index point in the preceding month), the twentieth consecutive expansion, as new orders and production volume expanded to 58.1 and 59.9 in November (from 56.8 and 58.9 in October) respectively – despite the rise in output prices. Also, stock of raw materials increased to 58.7 in November (from 56.2 in October) amid increased sales and shortened supplier delivery time due to greater efficiency of suppliers, to 56.9 (from 56.4).
Amid improved sales employment level grew, to 55.4 in November (from 54.8 in October). All of the fourteen manufacturing sub-sectors under survey recorded growth (higher than thirteen in the preceding month), especially ‘Food, beverage & tobacco products’ and ‘Paper products’ that registered faster expansion of 60.1 (from 55.6) and 59.3 (from 53.4) respectively. The non-manufacturing sector composite PMI registered 58.4 points in November 2018 (higher than 57.0 points in October 2018), the nineteenth consecutive expansion. The higher expansion in non-manufacturing sector was due to the rise in new business, to 57.5 in November (from 56.4 in October) which resulted in faster business activity at 60.4 (from 58.3).
In spite of the rise in average inputs cost, to 52.6 in November (from 50.7 in October), inventory grew faster, at 59.6 (from 57.6). Given the faster growth in business activity, number of persons employed increased as employment level index points expanded slower, to 56.2 (from 55.7).
Of the seventeen non-manufacturing sub-sectors under survey, sixteen sectors recorded growth (higher than thirteen in the preceding month), especially, ‘Water supply, sewage & waste management’ which registered faster expansion of 65.2 (from 45.8).
We note that the strategy by CBN to use the banks’ cash reserves in its vault to fund the real sector at a single digit interest rate has not been apparent, given the marginal increase in credit to private sector.
However, ahead of the release of Q3 2018 GDP figure next week, we expect a slightly higher than Q2 2018 growth rate amid the marginal increase in PMI readings in the third quarter compared to the second quarter (see chart above).