…Commercial papers will increase credit flow to economy – Analyst

Analysts at FSDH Research have said the recent statement by the Central Bank Nigeria governor at the end of the last  Monetary Policy Committee (MPC) meeting is encouraging large corporations to issue Commercial Papers (CPs), which may be bought by the apex bank if necessary, and increase credit creation and business expansion.  


The head of research, Ayodele  Akinyunmi, disclosed this at the monthly meet with newsmen in Lagos yesterday. 

Akinyunmi said while FSDH Research believes these measures may increase credit creation and business expansion to stimulate growth, complementary fiscal measures are required to de-risk the economy.


At the end of its July 2018 meeting, the MPC maintained the Monetary Policy Rate (MPR) at 14%, with the asymmetric corridor at +200 and -500 basis points around the MPR. It retained the Cash Reserve Ratio (CRR) and Liquidity Ratio (LR) at 22.50% and 30%, respectively. However, it intends to deploy unconventional strategies to boost credit creation and economic growth.

FSDH Research believes this measure will increase the issuance of CPs in Nigeria in HY2, 2018. The yields on the CP may also drop or trail the yields on the Nigerian Treasury Bills (NTBs).

“The measure will reduce the financial cost for large corporates and increase their profitability. Similarly, the CBN plans to implement measures to direct Cash Reserve Requirement (CRR) funds to the manufacturing and agriculture sectors of the Nigerian economy at 9% interest rate with a minimum tenor of 7 years and moratorium period of 2 years.” He added.

Meanwhile, data from CBN shows that net domestic credit decreased marginally by 0.57% to N25.72trn in May 2018, from N25.86trn in December 2017. The net credit to the private sector shrank marginally by 0.37% to N22.21trn during the same period.

On the equity market depreciation  in July 2018, following the appreciation recorded in June, FSDH Research believes the equity market is approaching an oversold position. There may be a reversal of the downward trend as the economic fundamentals support a recovery in the equity market.

In June, Nigeria Stock Exchange All Share Index (NSE ASI) depreciated by 3.29% (a loss of 3.34% in US dollars) to close at 37,017.78 points. Year-to-Date (YTD), the Index recorded a depreciation of 3.20%. 

Similarly, the market capitalisation recorded a M-o-M loss of 3.29% (a loss of 3.34% in US dollars) to close at N13.41tn (US$43.84bn). 

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