Nigeria’s Broad Money Supply (M2) surged by 51% year-on-year (YoY) to reach ₦108.96 trillion in November 2024, driven by increasing domestic borrowings by the Federal Government. This marks a significant rise from ₦72.03 trillion recorded in the same period of 2023, according to the Central Bank of Nigeria (CBN)’s latest Money and Credit Statistics report.
M2, a comprehensive measure of liquidity in the economy, includes cash, demand deposits, savings deposits, time deposits, and other money market instruments.
Trends in Money Supply Growth
Broad Money Supply maintained a consistent upward trajectory over six months from April 2024 before briefly declining by 1.5% month-on-month (MoM) in October to ₦107.7 trillion, down from ₦109.4 trillion in September. However, the trend reversed in November, with a 1.2% rebound to ₦108.96 trillion.
Key Drivers of Liquidity Expansion
The surge in M2 was fueled by growth across its major components:
- Quasi Money: Savings and time deposits, along with other near-money assets, grew marginally by 1.96% YoY to ₦72.7 trillion in November 2024, up from ₦71.3 trillion a year earlier.
- Demand Deposits: Marking a significant 34.4% YoY increase, these rose to ₦31.6 trillion from ₦23.2 trillion in November 2023.
- Currency Outside Banks: Increased by 50.9% YoY, reaching ₦4.65 trillion in November 2024, up from ₦3.08 trillion the previous year.
- Narrow Money (M1): Reflecting the combined growth of cash and demand deposits, M1 expanded by 38% YoY to ₦36.3 trillion from ₦26.3 trillion.
Domestic Credit Growth: Government and Private Sector
The CBN’s report also revealed notable growth in domestic credit:
- Credit to the Government: Loans and advances to the government surged by 54% YoY, reaching ₦39.6 trillion in November 2024, compared to ₦25.7 trillion in November 2023.
- Credit to the Private Sector: Increased by 27% YoY, amounting to ₦75.96 trillion, up from ₦59.7 trillion a year earlier.
Combined, these factors resulted in a remarkable 91% YoY rise in net domestic credit, which soared to ₦115.6 trillion in November 2024, up from ₦60.5 trillion in the same period of 2023.
Implications for the Economy
The surge in money supply reflects the Federal Government’s heavy reliance on domestic borrowing to finance fiscal deficits. While this liquidity expansion supports economic activity, it also raises concerns about potential inflationary pressures.
Experts caution that while rising credit allocation to the private sector is a positive sign for economic growth, the government must adopt balanced fiscal and monetary policies to manage the risks of excessive liquidity and inflation.
As Nigeria navigates its fiscal challenges, the focus will remain on ensuring sustainable economic growth while mitigating the adverse effects of increased borrowing and money supply expansion
