and gas sectors. monetary and credit aggregates have, however, underperformed consistently falling below their long term trends. the decline in broad money ( m2 ) growth witnessed up to july 2009 was reversed and except in january and may 2010, the growth rate has been positive. m2 grew by 4. 25 per cent in october 2010 which when annualized represented a growth of 5. 10 per cent. net credit to the economy grew substantially since june 2009 although it has moderated since january 2010. in october 2010, aggregate credit grew by 19. 69 per cent which annualizes to 23. 63 per cent. credit to the private sector which grew since july 2009, and declined between january and august, 2010. since then, it has been rising. by october 2010, credit to private sector, core private sector, and government grew by 3. 86, 3. 07 and 64. 02 per cent, respectively, on annualized basis. it should, however, be noted that the decline in monetary aggregates is not peculiar to nigeria as other countries faced similar outcomes due to the global financial crisis. the good news is that the banking system has resumed lending. new credit to the economy increased from n145, 459 million in april 2010 to n173, 807 million in may 2010, n345, 998 million in june, 2010 representing increases of 19. 49 per cent and 99. 1 per cent respectively. it however, declined to n322, 275 million in october, 2010, representing decline of 6. 85 per cent. credit by non - intervened banks rose from n127, 270 in april 2010 to n145, 885 million in may 2010, and n218, 904 million in october 2010, representing increases of 14. 63 per cent and 50. 1 per cent, respectively. similarly, the intervened banks credit increased from n18, 189 million to n27, 922 million and n43, 371million, also representing 53. 51 per cent and 55. 33 per cent, respectively. the bulk of the credit went to oil and gas, manufacturing, and transportation and storage. furthermore, the stress test conducted recently on the twenty four banks has shown that the financial soundness of the banks ( both intervened and non - intervened ) has improved significantly compared to the crisis period. it is also gratifying to note that of the n500 billion approved for power and aviation sectors as well as for the refinanc

state of the nigerian banks, the cbn in june 2009, took a three pronged approach to assess the financial condition of the 24 banks. the first was the special examination exercise jointly conducted by the cbn and the nigerian deposit insurance corporation ( ndic ). this exercise highlighted inadequacies in capital asset ratios and liquidity ratios as well as weaknesses in corporate governance and risk management practices in 9 banks. these banks were found to be in a grave situation as a result of capital, liquidity and corporate governance concerns. they failed to meet the minimum 10 per cent capital adequacy ratio and 25 per cent minimum liquidity ratio. apart from accumulating high non - performing loans, these banks were seriously exposed to the oil and gas sector as well as the capital markets. poor risk management practices in the form of absence of necessary controls measures were prevalent as the board and management of the banks had failed to observe established controls. the remaining14 banks were found to be in a sound financial state and did not require the cbn to take any action. the second approach was to carry out diagnostic audit through independent consultants. the report of the audit exercise revealed greater magnitude of weak financial condition of the nine banks. all of them were “ technically ” insolvent with significant negative asset value. it also exposed several illegal activities that had been taking place in five of the affected banks. it was against this background that the cbn moved decisively to strengthen the industry, protect depositors and creditors, restore public confidence and safeguard the integrity of the nigerian banking industry. the initial measures / initiative taken by the cbn in conjunction with ndic and the federal ministry of finance ( mof ) included injection of n620 billion into the nine banks ; the replacement of the chief executive / executive directors of eight of the nine banks with competent managers with experience and integrity ; reaffirmation of the guarantee of the local interbank market to ensure continued liquidity for all banks ; and guaranteeing of foreign creditors and correspondent banks ’ credit lines to restore confidence and maintain important correspondent banking relationships. bis central bankers ’ speeches when the new management of the banks took office, it became necessary to also carry out further detailed and independent assessment of the financial conditions of the banks. thus, the third approach was to carry out management account audit of the affected banks by their new management. the outcome was very much in line with that of the audit report. consequently, the management took numerous actions under the cbn guidance to ensure that the banks