The Central Bank of Nigeria (CBN) has reported a remarkable surge in the country’s broad money supply (M2), which reached N108.96 trillion in November 2024; a 51% year-on-year increase driven largely by the federal government’s domestic borrowing.
The figure marks a sharp rise from the N72.03 trillion recorded in November 2023, as outlined in the CBN’s Money and Credit Statistics released on Monday. M2, a key measure of liquidity, includes cash, demand deposits, savings, money market accounts, and time deposits, reflecting a significant expansion in financial activity despite growing fiscal pressures.
The increase in money supply was not without fluctuation. After six months of consecutive growth, M2 declined by 1.5% in October 2024 to N107.7 trillion from N109.4 trillion in September. However, it rebounded by 1.2% in November, demonstrating the resilience of Nigeria’s financial system amid fiscal challenges.
Key components of M2 showed notable growth are; Quasi money involving savings and time deposits which rose marginally by 1.96% YoY to N72.7 trillion.
Demand deposits increased significantly by 34.4% YoY, reaching N31.6 trillion. Currency outside banks surged by 50.9% YoY to N4.65 trillion.
Narrow money (M1) cash and demand deposits expanded by 38% YoY to N36.3 trillion. The surge in liquidity was accompanied by a substantial increase in credit allocation: Credit to the government jumped 54% YoY to N39.6 trillion from N25.7 trillion. Credit to the private sector grew 27% YoY to N75.96 trillion.
Overall, net domestic credit soared by 91% YoY to N115.6 trillion, highlighting the government’s heavy reliance on domestic borrowing to bridge fiscal deficits.
While the expanding money supply supports economic activities, experts warn that it could exacerbate inflationary pressures if not carefully managed. The interplay of rising debt and liquidity underscores the need for balanced fiscal and monetary policies to sustain growth without undermining economic stability.
As Nigeria continues to navigate fiscal challenges, economists emphasize the importance of a cautious approach to liquidity management to mitigate long-term economic risks.
SOURCE: THE SUN
