Nigeria’s Broad Money Supply (M2) soared by 51% year-on-year (YoY) to reach N108.96 trillion in November 2024, fueled by increasing domestic borrowings by the Federal Government, according to the Central Bank of Nigeria (CBN).
This increase represents a sharp rise from the ₦72.03 trillion recorded in the same period of 2023, according to the Central Bank of Nigeria (CBN)’s Money and Credit Statistics released on Monday.
M2 encompasses cash and demand deposits, savings deposits, money market deposits, and time deposits, serving as a broad measure of liquidity in the economy.
While M2 witnessed sustained growth over six consecutive months from April 2024, the trend briefly reversed in October 2024, declining by 1.5% month-on-month (MoM) to ₦107.7 trillion from ₦109.4 trillion in September. However, the supply rebounded by 1.2% in November, reaching ₦108.96 trillion.
Key Components of the Growth
The YoY surge in Broad Money Supply was driven by positive movements in its core components, highlighting a broader liquidity expansion across various financial instruments:
- Quasi Money: Savings deposits, time deposits, and other near-money assets grew marginally by 1.96% YoY, reaching N72.7 trillion in November 2024 from N71.3 trillion in November 2023.
- Demand Deposits: These increased significantly by 34.4% YoY, climbing to N31.6 trillion from ₦23.2 trillion during the same period.
- Currency Outside Banks: A sharp rise of 50.9% YoY brought this figure to ₦4.65 trillion in November 2024 from N3.08 trillion in November 2023.
- Narrow Money (M1): Reflecting an increase in cash and demand deposits, M1 expanded by 38% YoY, growing to N36.3 trillion from N26.3 trillion in November 2023.
Domestic Credit Growth
The CBN data also revealed a notable increase in credit allocation across the government and private sector:
- Credit to the Government: This rose by a staggering 54% YoY, reaching N39.6 trillion in November 2024 compared to N25.7 trillion in November 2023.
- Credit to the Private Sector: Loans and advances to the private sector increased by 27% YoY, amounting to N75.96 trillion from N59.7 trillion in November 2023.
This combined growth in domestic credit resulted in a massive 91% YoY rise in net domestic credit, which soared to ₦115.6 trillion in November 2024 from N60.5 trillion in the corresponding period of 2023.
The surge in money supply reflects increased government reliance on domestic borrowing to finance fiscal deficits, potentially fueling inflationary pressures. While the rising liquidity supports economic activities, it also stresses the need for balanced fiscal and monetary policies to sustain economic growth without exacerbating inflation.
As the Federal Government continues to grapple with fiscal challenges, experts suggest that a cautious approach is necessary to manage the liquidity expansion and its long-term impact on Nigeria’s economy.