In February 2024, Nigeria’s broad money supply (M3) reached a record high of N95.56 trillion, defying the Monetary Policy Committee’s (MPC) tightening stance.
This amount shows a significant year-over-year gain of N42.26 trillion, a whopping 79.29% increase from the N53.3 trillion recorded in February 2023.
Furthermore, this amounts to N1.84 trillion, or 1.96% more than the previous month of January 2024, recorded at N93.72 trillion. This information was made public by the Central Bank of Nigeria (CBN) in its most recent money and credit statistics.
In February 2024, Nigeria’s Money Supply (M2) reached a historical high of N93.9 trillion, surpassing the previous record of N92.8 trillion set in January.
Nigeria’s broad money supply (M3), a crucial indicator of the country’s economic liquidity, has been rising steadily and more quickly in recent years.
Including net foreign and domestic assets, M3 provides a comprehensive view of the country’s monetary dynamics. Moreover, it is M1 plus CBN banknotes.
M2 consists of demand deposits, quasi-money (investments), and cash that is not held in a bank.
At the preceding MPC meeting in January 2024, Ms. Emem Usoro, Deputy Governor, of the Operations Directorate, mentioned the following in her statement:
“Notably, broad money and inflation have risen practically in unison, with the broad money supply (M3) increasing by 18.25% by the end of January 2024. The increase in securities other than shares, transferable deposits, and other deposits was credited with this growth; they increased by 26.55%, 4.73%, and 99.98%, respectively.”
“On the asset side, net foreign assets (NFA) restrained the rise of broad money while net domestic assets (NDA) made a substantial contribution to it. Real interest rates are negative as a result of the inflation’s persistent growth.”
She said that a number of variables, including the ongoing effects of PMS adjustments, import costs, exchange rate passthrough, and money supply growth, could contribute to the persistence of inflationary pressures in the near future.
The increase in money supply signals an impending spike in inflation, which poses a serious risk to Nigerians’ purchasing power.
In addition, a rising money supply usually corresponds with falling interest rates, especially in conditions where there are few good investment opportunities.
This trend could make investment vehicles in Nigeria less appealing to foreign investors, which would be extremely concerning given Nigeria’s critical need for consistent dollar inflows.
The country’s money supply has increased significantly, but economic development has lagged. Nigeria is expected to expand at one of the slowest rates in West Africa in 2024, with an estimated 2.9% to 3.1% growth rate.
