Investors Lend More Money to Government amid Rising Interest Rate in May

In the just concluded week, Central Bank of Nigeria (CBN) released its depository
corporations survey which showed a 2.38%
month-on-month (m-o-m) rise in Broad Money
Supply (M3 money) to N40.01 trillion in May 2021.
This resulted from a 1.11% increase in Net Domestic Assets (NDA) to N32.66 trillion and a 8.47% rise in Net Foreign Assets (NFA) to N7.36 trillion.
On domestic asset creation, the increase in NDA was chiefly driven by a 1.46 m-o-m increase in Net Domestic Credit (NDC) to N44.71 trillion.
Further breakdown of the NDC showed a 2.87% m-o-m increase in Credit to the Government to N12.51 trillion and a 0.93% rise in Credit to the Private sector to N32.19 trillion in the review period – faster growth in credit to government was partly due to the jump in stop rate as investors got relatively attractive returns on investment; albeit, it was negative real returns as inflation stood well above stop rate.

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