By Babajide Komolafe

 


LAGOS— The Central Bank of Nigeria (CBN), yesterday, threatened to withdraw public sector deposits from banks as part of its effort to control money supply in the economy.

The Bank also announced that the federal government overspent by N1.1 trillion in the 2011 fiscal year, saying that weak economic conditions of Nigeria’s major trading partners pose serious threat to the nation’s economic growth.
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These were part of the  highlights  of the new   monetary, credit, foreign trade and exchange policy guidelines for fiscal years 2012 to 2013 released by the apex bank yesterday.  The policy among other things mandates banks to conduct quarterly stress test, and introduced additional restriction on purchase of foreign exchange for importation of petroleum products.

The Policy said, “Public sector deposits are an important part of the liquidity of the banking system. Accordingly, the CBN shall continue to monitor the movement of deposits of key government parastatals and overheads of core Federal Ministries to ensure compliance with manageable liquidity conditions in the economy. During the programme period, banks may be informed in advance of any need to withdraw or re-inject public sector deposits in the banking system as may be dictated by liquidity conditions.

“The CBN shall sustain the use of macro-prudential regulation and stress testing in assessing the health of banks in 2012/2013. In this regard, banks shall be required to conduct and forward to the CBN, on a quarterly basis, a comprehensive report of their stress test for the period,” the policy said.

The policy placed additional restriction of 48 hours notice on purchase of foreign exchange for importation of petroleum products. It said, “For the purpose of establishing Letters of Credit and Bills for Collection transactions for the Importation of Petroleum products, authorized dealers shall forward to the Director, Trade & Exchange Department, all relevant supporting documents for consideration prior to commencement of the transaction. Furthermore, the CBN shall be notified within 48 hours by the authorized dealers before bidding for funds to pay for the transactions.”

FG overspent N1.1 trn in 2011

On the performance of the economy in 2011, the CBN said, “The provisional cumulative Federal Government retained revenue for 2011 was N3, 083.38 billion, showing a decrease of 0.2 per cent below the level in 2010. On the other hand, cumulative aggregate expenditure for the period stood at N4, 259.85 billion, showing an increase of 1.6 per cent over the level in 2010. The fiscal operations of the Federal Government in 2011 resulted in an estimated deficit of N1, 176.46 billion, compared with the budgeted deficit of N1, 136.62 billion for fiscal 2011. The high deficit had negative implications on the outcome of monetary policy.

“Provisional data from the National Bureau of Statistics (NBS) indicated that real Gross Domestic Product (GDP) grew by 7.7 per cent in 2011, slightly lower than the 7.9 per cent in 2010. The development reflected largely, the performance of the non-oil sector, with relative contributions of 0.6 from 1.2 per cent at the end of the preceding year.

Crude oil production rose marginally in 2011, in spite of constraints imposed by pipeline leakages and oil supply logistics while international oil prices rose, generally.

At an estimated average of 2.38 million barrels per day (mbd) in 2011, crude oil output rose by 5.78 per cent, compared with 2.25 in 2010. Consequently, annual aggregate output of crude oil at end-December 2011 was estimated at 868.7 million barrels (mb), while allocation for domestic consumption remained at 0.445 mbd or 162.43 million barrels at end-December 2011. The average spot price of Nigeria’s reference crude, the Bonny Light (37o API), was US$113.73 per barrel in 2011, compared with US$80.92 in 2010.

“The performance of the external sector in 2011 improved moderately; with a lower overall balance of payments position of N13.2 billion (US$0.08 billion), compared with the level of N1, 491.48 billion (US$10.0 billion) in 2010. The development reflected weak economic conditions in some of Nigeria’s major trading partners, particularly the United States of America (USA) and the Euro Area. At N15, 021.80 billion, total exports (fob) increased by 23.4 per cent in 2011. At US$80.92 per barrel in 2010, the price of Nigeria’s reference crude (Bonny Light 370 API), increased by 40.55 per cent in 2011.

The current account position was in surplus of N2,605.3 billion (US$16.8 billion) in 2011, compared with N0.37 billion (US$2.5 billion) in 2010, representing 7.1 per cent of the Gross Domestic Product (GDP). The increase in the current account surplus reflected higher exports occasioned by significant increase in international price of crude oil as well as improvements in domestic oil.”

Major threats to economic growth in 2012

On  threats to the economy in 2012, the CBN said, “The sluggish growth in the economies of Nigeria’s major trading partners and the lingering sovereign debt crisis in the Euro area, remain potential threats to domestic economic growth. Given that Nigeria is oil dependent with high imports, the challenge to policy in the programme period remains the management of external reserves and diversification of the economy.

 

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