The money supply increased by an astounding 50% last year, or N25.6 trillion, to reach an all-time high of N78.74 trillion.
The Central Bank of Nigeria (CBN) provided the data, which indicated that this growth was among the strongest in recent memory.
The total amount of money held by the public is used to calculate the money supply, which peaked in 2022 at N52.16 trillion but increased by more than half that amount.
The money supply and inflation should, in theory, go up. Therefore, according to economists, maintaining the money base would be necessary to control inflation.
To keep inflation under control, some theorists argue that increasing the money supply should be balanced by increases in output.
It’s interesting to note that although the money supply skyrocketed, Nigeria’s economy expanded very slowly, at an estimated annualized pace of 2.9%. This indicates that the money supply expanded more than 17 times quicker than the overall economy.
As the year went on, inflation started to cause serious economic problems. The headline inflation rate increased by 7.5 percentage points last year, from 21.5% to 28.9% at year’s end.
Several economists have predicted that inflation will decline this year. However, the currency rate has continued to be a key source of concern for economists who have identified it as a major driver of inflation.
The naira’s movement against the dollar over the last three days in the parallel market has caused new worries regarding the prospects for inflation in the near- to medium-term.
Since many importers and producers cannot access the official foreign exchange (FX) market, the unofficial market has evolved into an index used to determine prices.
According to market trends, wholesale prices for necessities are changed virtually every week or even twice a week in some circumstances. According to analysts, the present situation can make inflation predictions worse and send the economy into meltdown.
Under its recently implemented inflation targeting regime, the Central Bank of Nigeria (CBN), whose two-monetary tightening campaign failed to control inflation, has set a long-term inflation target of 21.4%.
A key component of the economic equation is the predicted moderation in PMS pump prices, which is caused by the anticipated operational state of the nation’s government and privately held refineries in 2024. Fuel cost reductions or economic stabilization are expected to have substantial effects on several different sectors and boost overall economic resilience and efficiency.
“The CBN’s inflation-targeting policy, which aims to contain inflation to 21.4%, is likely to reduce inflationary pressures in 2024. Better agricultural output and less strain on the global supply chain would help with this, which will benefit businesses by increasing consumer confidence and purchasing power,” according to CBN governor Yemi Cardoso.
The president will likely discuss his stance on the current interest rate hike at his first Monetary Policy Committee (MPC) meeting, which is scheduled to take place in just over a month.
