Money supply increases 62% to N107trn amidst rising poverty

Nigeria’s broad Money Supply (M2) increased by 62 percent year-on-year, YoY, to N107.2 trillion in August 2024, from N66.19 trillion in the corresponding period of 2023.

M2 is the aggregate money supply in the economy made up of Quasi Money and Narrow Money Supply. Quasi-money, including savings deposits, time deposits, and other near-money assets, rose significantly.

The data showed that Quasi Money grew by 75.2 percent YoY to N72.2 trillion from N41.2 trillion.

Narrow Money Supply (M1), also grew by 43 percent YoY to N34.9 trillion from N24.4 trillion in August 2023.

This comes against the backdrop of economic hardship across the country and demographic group especially the low income bracket.

According to the Central Bank of Nigeria, CBN, Money and Credit Statistics data released yesterday the M2 has continued to increase after a temporal decline it recorded in March 2024.

The report also showed the increase in money supply followed positive changes in its components.

However the increase in M² have been attributed to high government domestic borrowing from the private sector among other factors.

The report also shows that demand deposits in banks increased by 40 percent YoY to N31.08 trillion from N22.2 trillion in August 2023.

Currency outside banks increased by 77.2 percent YoY to N3.9 trillion from N2.2 trillion in August 2023.

Commenting on the development, Professor of Economics, University of Lagos and Director Center for Economic Policy Analysis and Research (CEPAR), Nwokoma Ndubisi, explained: “Basically, the government has been borrowing over the period and the large chunk of domestic debt is quite high and talking about treasury bills and other financial instruments which the Central Bank will have to pay out money to get.

“They pay out money to get the paper, the security, a kind of IOU and when they sell the security, the paper, the money reverses; it goes back to the public through the financial system.

“So there has been a high tempo of this kind of transaction in the Government domestic credit market, the domestic market for securities. So definitely that is how the volume of money supply goes up or comes down and largely a number of times it is due to open market operations in the Central Bank because they increase money supply when they are the issuers. The other way round they reduce money supply when they are doing the opposite.

“These also affect other things and if they don’t manage it properly it will also affect prices in the economy.

“So there has been a high tempo of public borrowing in the domestic private sector market.”

Meanwhile, the CBN’s data shows credit to the government increased by 38.4 percent YoY to N31.15 trillion in August 2024 from N22.5 trillion in August 2023.

Credit to the private sector rose YoY by 31.2 percent to N74.7 trillion in August 2024 from N56.9 trillion in August 2023, but declined by 1.06 percent Month on Month, MoM, from N75.5 trillion in July 2024.