Nigeria’s Money Supply Hits ₦108.96 Trillion Amid Rising Government Borrowing
The Central Bank of Nigeria (CBN) has reported a significant 51% year-on-year (YoY) increase in Nigeria’s Broad Money Supply (M2), which rose to ₦108.96 trillion in November 2024. This surge, up from ₦72.03 trillion in November 2023, is attributed to growing domestic borrowing by the Federal Government.
Steady Growth with Temporary Fluctuations
Broad Money Supply, which measures the total liquidity in the economy—including cash, demand deposits, and savings—maintained consistent growth throughout much of 2024. However, after a slight decline of 1.5% in October to ₦107.7 trillion, the figure rebounded in November, climbing 1.2% month-on-month.
Key Drivers of Liquidity Expansion
Several factors contributed to this sharp rise in M2, showcasing broad-based growth across its components:
- Quasi Money: Reflecting savings and time deposits, this segment rose marginally by 1.96% YoY, reaching ₦72.7 trillion in November 2024.
- Demand Deposits: These surged by 34.4%, totaling ₦31.6 trillion, compared to ₦23.2 trillion in the same period last year.
- Currency in Circulation: Currency outside banks recorded a robust 50.9% YoY increase, reaching ₦4.65 trillion.
- Narrow Money (M1): Encompassing cash and demand deposits, M1 expanded by 38% YoY to hit ₦36.3 trillion.
Soaring Credit to Public and Private Sectors
The CBN’s data also highlights substantial growth in credit allocation:
- Public Sector Credit: Loans to the government rose 54% YoY, totaling ₦39.6 trillion in November 2024.
- Private Sector Credit: Lending to businesses and individuals increased by 27% YoY, reaching ₦75.96 trillion.
Combined, these figures drove net domestic credit to a staggering ₦115.6 trillion in November 2024, a 91% YoY jump from ₦60.5 trillion in 2023.
Economic Implications and Expert Recommendations
The rapid expansion in money supply underscores the government’s reliance on domestic borrowing to fund fiscal deficits. While the increased liquidity supports economic activities, it also heightens inflation risks, especially in an environment where fiscal challenges remain prevalent.
Experts emphasize the importance of balanced policy interventions to manage the effects of rising liquidity on inflation and economic stability. They recommend that fiscal and monetary authorities work together to ensure sustainable growth without overheating the economy.
With domestic credit continuing to rise, the government’s ability to address structural fiscal issues will play a critical role in determining Nigeria’s economic trajectory.
