Friday, December 6, 2024

Nigeria’s Money Supply Soars to N108.9 Trillion, Marking a 68% Increase in a Year

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In September 2024, Nigeria saw its money supply grow by 62.8% compared to the previous year. This happened even though the Monetary Policy Committee (MPC) tried to make it harder to spend money to control rising prices.

The Central Bank of Nigeria (CBN) shared that the total money reached N108.95 trillion in September 2024, up from N66.94 trillion in September 2023.

Comparing month-to-month, from August to September 2024, the money supply grew by 1.6%, increasing from N107.19 trillion.

This growth shows that Nigeria’s economy is strong, even as the CBN works to manage inflation and support the local currency. This effort is led by Governor Yemi Cardoso, who started his role in September 2023.

What Causes Money Supply to Go Up? 

Money supply, also called M3, is all the money a country has, including foreign and local money. It gives a full picture of how much money is moving around.

Let’s break down what M1 and M2 mean:

  • M1 is cash, checks, and traveler’s checks – really easy to use as money.
  • M2 is like M1 but also includes money that is not in the bank and some investments.

Even with the MPC’s plan to keep the money tight to control spending, money supply is still growing strongly.

  • The increasing money supply points to reasons like government spending behind the scenes.
  • In the past year, net domestic assets (NDA) went up by 54.6%, showing businesses are borrowing more money despite high interest rates. From August to September 2024, NDA grew again by 3%.
  • Additionally, net foreign assets (NFA) shot up by 97.9% over the year but fell by 2.7% from August to September, possibly because the CBN is trying to keep the local money stable against other world currencies.

The continual rise in money supply, even with the MPC’s protections, shows how tricky it can be to manage the country’s money.

Cardoso’s policies, focusing on keeping prices steady, helping the currency, and being clear, have played a role in this money picture.

What do People at MPC Think? 

At a meeting in Abuja, Yemi Cardoso from the CBN talked about the money supply going up despite efforts to slow it down. He stressed that it’s important to be careful with this situation to stop prices from jumping up too high.

He mentioned: “The MPC noticed the continued increase in money supply and said we need to manage this well to avoid more pressure on foreign money exchanges.”

In shared statements, Aku Pauline Odinkemelu pointed out that too much money could make prices rise more, linking this to government money distributions.

She added: “I know excess money is common in developing countries, but Nigeria’s fast-growing money supply, mainly due to surprising government finances, makes controlling money policy hard. A slow but sure increase in tight measures might help manage this in banks.”

Lamido Abubakar Yuguda too talked about the growing money supply in September 2024, explaining that both foreign and local money assets add to inflation worries.

He noted: “Wide money supply grew 34.1% from July 2024 over December before echoing increased inflationary pressure due to currency drops, needing stronger money control policies.”

Without strong actions, high liquidity – lots of money moving around – might make inflation worse, needing constant care to keep the economy steady.

What You Should Know 

  • When more money circulates, the economy can grow because businesses can borrow money more easily to grow and improve.
  • More money around means more buying, which can help businesses grow, make more goods, and create more jobs.
  • Still, if too much money chases the same goods, prices can go up, which is hard for people, especially those with less money.
  • If Nigeria’s money supply keeps rising without more goods being made, inflation could jump up more, challenging how much people can buy, especially affecting poorer families.
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