Monetary Indicators ride currency waves higher
​In today’s cut-out of our core strategy document – The Nigeria Strategy Report, we continue with the review of Nigerian macroeconomic environment by examining movements in Money Supply aggregates over H2 2016 and delineating our expectations for same over the rest of 2017.
Following the currency-induced expansion in H1 16 (+8.3%), Broad money (M2) grew at a more subdued pace (+2.7% to N22.3 trillion) in H2 given the tamer USDNGN depreciation (9.1%) relative to the first half of the year (42%). That said, the annualized reading of 13.2% tracked above CBN’s target of 10.9% for 2016. Parse through breakdown isolates slower expansion in quasi money (annualized: +8.3% to N12.3 trillion), which dampened momentum in narrow money (M1) (annualized+20.3% to N10.0 trillion), as the source of slackening M2 growth. The strong M1 growth reading largely stemmed from a rebound in currency in circulation (H2 16: +8.4%, H1 16: -9.3%) as well as upswing in demand deposits (H2 16: +9.7%, H1 16: +8.7%).The gains in the latter emanated from higher private sector deposits at CBN (+51.1% to N2.7 trillion) which neutered lower private sector deposits at Commercial (-2.6% to N5.8 trillion) and Merchant (-38.4% to N16 billion) banks.
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