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BREAKING: Money supply in Nigeria crosses N50 trillion
The country’s money supply, which stood at N44.4 trillion at the end of 2021, has increased by N6.1 trillion just this year. The rise is…
According to data from the Nigerian central bank, the money supply, often known as M2, reached a record high of N50.5 trillion in October 2022.
One of the most significant financial figures maintained by Nigeria’s central bank or any central bank in the world has reached its highest level ever reported. October alone saw an N1.26 trillion growth in the money supply, making it the third biggest month this year behind April and May.
The country’s money supply, which stood at N44.4 trillion at the end of 2021, has increased by N6.1 trillion just this year. The rise is expected to surpass the N6.6 trillion total achieved in 2021.
Effects on the Economy
A rise in the money supply in an economy is intended to accomplish two key goals. As an increase in the money supply is sometimes considered a solution in an economy that is experiencing a recession or a downturn, it can aid in the country’s economic growth.
On the other hand, an excessive increase in the money supply can cause soaring inflation in any nation, which would force a change in course. Nigeria has escaped a recession, but the nation is currently witnessing rising inflation, which indicates that an excessive amount of money is a serious problem that needs to be fixed right away.
The CBN’s low-interest policy, which was implemented to promote economic growth, its trillions of naira in intervention funds, and its use of its Ways and Means powers to bail out the federal and state governments have all contributed significantly to the rise of the money supply over time. Too many nairas are being chased after too few dollars.
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Demand deposits with banks, investments, and currency held outside of banks make up the majority of the money supply. The CBN estimates that there is around N29.2 trillion in quasi-money, which is money invested in liquid assets.
About N18.4 trillion is kept in demand deposits, which are funds held by banks on behalf of their clients. Demand deposits helped to drive this year’s N6.1 trillion increase by N3.3 trillion. About N2.8 trillion is held outside of banks.
Coming up
The monetary policy committee of the central bank will convene on Monday, November 21, and Tuesday, November 22, respectively.
The most recent report from the NBS, which showed the inflation rate to be above 21%, would probably prompt a response from the apex bank. When making a decision at the committee meeting, the apex bank will take the expanding money supply into account. As mentioned, despite efforts to reduce it, the money supply increased once more in October.
Quasi-money accounted for nearly all of the N1.2 trillion increase in the money supply for October.
Raising CRR in response to yet another round of increased monetary policy rates is likely.