Money Supply Jumps To Record High Of N49 Trillion

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The money supply in the economy is at its highest level on record, at almost N49.3 trillion in August, topping the previous record set in May 2022.

Money Supply is now at a 9.9% gain from December 20, 2021, when the country recorded N44.4 trillion. This is based on statistics acquired by Nairametrics from the Central Bank of Nigeria (CBN) on the country’s money supply.

In its last monetary policy committee meeting, the central bank explained the growth in money supply was due to an increase in net domestic assets.

Money Supply Jumps To Record High Of N49 Trillion

“The Committee noted that broad money supply (M3) grew by 11.05 per cent in August 2022, compared with 8.66 per cent in July. This was driven largely by the growth in Net Domestic Assets (NDA) of 26.19 per cent in July 2022, compared with 22.78 per cent in the preceding month. The sustained growth in Net Domestic Assets (NDA) was driven largely by increased claims on the Federal government and other financial corporations and the private sector.”

Considering the multiple interest rate hikes implemented since July is intended to combat inflation and lower the amount of money in circulation, this increase in the money supply is concerning.

The CBN also mentioned that the recent rate hike could help slow down the pace of money supply, though Nairametrics believes this will take some time to occur effectively.

“The MPC noted that a tight policy stance would help consolidate the impact of the last two policy rate hikes, which is already reflecting in the slowing growth rate of money supply in the economy.”

A country’s money supply is a crucial factor in whether or not inflation develops, and Nigeria’s money supply is at an all-time high. The amount of money in circulation has grown over time, owing largely to the CBN’s low-interest policy implemented to stimulate economic growth.

Trillions of naira in CBN intervention funds, as well as CBN bailouts of federal and state governments through its Ways and Means powers, have boosted the money supply and created a strong inflationary environment.

According to the data, the Ways and Means balance was N16.1 trillion in August 2021 but has since risen to N22.068 trillion in August 2022. This is a 36% increase year on year.

Source: Nairametrics