Nigeria’s Money Supply Hits New High of N64.9 Trillion in July

In July 2023, Nigeria’s monetary base surged to N64.9 trillion, marking a noteworthy upswing from the N64.3 trillion registered in June.

This stands in stark contrast to the N55.5 trillion documented in May, resulting in a rather disconcerting increase of N9.4 trillion.

These statistics have been unveiled by the Central Bank of Nigeria’s most recent data release, encompassing insights from its comprehensive money and credit statistics report.

The money supply, referred to as M2, encapsulates the total quantum of money accessible within the economy at a specific juncture. This encompasses tangible currency like coins and banknotes, along with a variety of deposits held by individuals, businesses, and institutions within banks and other financial establishments.

Why this matters: The money supply is a crucial indicator when evaluating interest rates and potential inflation during a certain timeframe.

• The recent surge in Nigeria’s money supply aligns with challenges like escalating inflation, pressure on the exchange rate, and diminishing interest rates.
• As the money supply grows, there’s a rising chance of inflation, leading to decreased purchasing power.
• Additionally, a larger money supply might result in declining interest rates, especially when investment assets are in short supply.
• This could potentially make Nigerian assets less enticing to overseas investors, a concern given Nigeria’s dependence on dollar imports.

Key Highlights of the Data

M2 Breakdown – A closer look at the data reveals that certain components of the money supply, namely demand deposits, quasi-money, and currency outside banks, also witnessed growth.

• Specifically, quasi-money, which pertains to financial tools that can be easily converted to cash, surged by N905.8 billion for the month.
• ThePressNG analysts believe this rise may be due to the revaluation of certain dollar-tied investments.
• Moreover, demand deposits, primarily made up of chequing accounts or funds in banks accessible without prior notice, fell by N283.7 billion.
• In contrast, currency outside banks observed a relatively modest increment of N54 billion.

M3 also Rises – Apart from M2 components, another money supply measure known as M3, which incorporates the aggregate of net domestic assets and net foreign assets, also exhibited growth. Both components recorded growth from June to July.

• Remarkably, net foreign assets saw a substantial rise, moving from the N4.9 trillion recorded in May 2023 to N9.2 trillion. It was, however, N11 trillion in June 2023.
• The dynamic between M3 and M2 unveils a mix of elements causing the surge, including the revaluation of dollar assets, the incorporation of new assets, and credit formation in July.
• Notably, credit to the government expanded from N31.2 trillion to N32.3 trillion, and net domestic credit climbed from N84 trillion to N86.4 trillion.
• The M3 for July 2023 stood at N65.4 trillion, a slight increase compared to the M2 at N64.9 trillion.