Nigeria witnessed an unprecedented surge in its broad money supply, reaching a new peak of N93.72 trillion as of January 2024, illustrating a significant leap forward.
This amount reflects a remarkable increase of 76% from the N53.14 trillion noted in January of the previous year, demonstrating an impressive annual growth of N40.48 trillion.
Additionally, this figure saw a substantial 19% rise from December 2023’s N78.74 trillion, translating into an increase of N14.98 trillion.
Insights from the Central Bank of Nigeria (CBN) reveal these significant alterations within the country’s financial environment, as outlined in its latest money and credit statistics report.
The upward movement of Nigeria’s broad money supply (M3), an essential indicator of the economy’s liquidity, has been unmistakable, accelerating over recent times. The M3 metric includes both net foreign and domestic assets, providing a comprehensive view of Nigeria’s financial health.
Importance of these developments The expansion in Nigeria’s monetary base is significant, aligning with various economic hurdles, including rising inflation, the naira’s depreciating value, and falling interest rates.
The increase in money supply signals potential inflationary pressures, threatening the average Nigerian’s buying power. An expanded monetary base often leads to lower interest rates, especially in scenarios where investment options are scarce.
This situation could detract from the appeal of Nigerian investments to international financiers, crucial for the country’s need for consistent dollar receipts.
Further Details Despite the notable increase in money supply, Nigeria’s economic growth remains sluggish, with predictions for 2024’s growth rate hovering between 2.9% and 3.1%, marking it as one of the slowest in West Africa.
The growth of the money supply significantly outpaces that of the economy itself, presenting a stark contrast.
Inflation remains a major worry, with January 2024’s headline inflation rate at 29.9%. Although it is expected to decrease to 21.5% within the year, it could spike to as high as 44% under unfavorable economic conditions.
The upcoming meeting of the CBN’s Monetary Policy Committee (MPC) is set to focus heavily on the implications of this monetary expansion, especially in terms of the Monetary Policy Rate (MPR), crucial for Nigeria’s fiscal stability and progression.
Despite attempts by the CBN to implement stricter monetary policies and absorb surplus liquidity, the broad money supply has surged.
The CBN has progressively increased the MPR from 11.5% in May 2022 to 18.75% by July 2023, marking a 725 basis point rise in just over a year.
Governor Yemi Cardoso is anticipated to soon announce his position on the continuing interest rate increases and outline his strategy against the backdrop of rising inflation.
Yet, his measures might clash with President Bola Tinubu’s intentions to lower interest rates in Nigeria, potentially causing a conflict between the government’s economic goals and the CBN’s stringent monetary stance.
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