Cynthia Ezekwe
The Central Bank of Nigeria (CBN) has disclosed that Nigeria’s total money supply declined to N71.33 trillion in November 2023, a decrease of 1.83 per cent or N1.33 trillion from N72.66 trillion reported in October 2023.
The term “money supply” or “M2” refers to the total amount of money available in the economy, including physical cash, such as coins and banknotes, as well as various types of deposits held by individuals, businesses, and institutions in banks and other financial institutions.
The M2 money supply for 2023 started at N52.84 trillion, as stated in the CBN’s “Money and Credit Statistics.” This figure increased to N71.33 trillion by November of the same year. The increase was largely driven by the growth in the net foreign assets (NFA) of the central bank, which rose significantly during the period.
Analysts noted that the recent surge in Nigeria’s money supply aligns with challenges such as the rising inflation rate, pressure on the exchange rate, and falling interest rates. An increase in the money supply typically leads to higher inflation, as more money in circulation drives up the cost of goods and services. This in turn reduces the purchasing power of individuals, leading to a decline in living standards.
Segun Ajibola, the former president and chairman of the Council of Chartered Institute of Bankers of Nigeria (CIBN), explained that the unification of the naira was a factor in the increase in M2.
He said, “One thing is clear that if there is a deprecation in the value of a currency and part of the supply is foreign currency, by the time we monetise foreign currency to local currency, the figure is expected to increase.
As the portion that is going into federation accounts by way of the dollar when converted to the current foreign exchange rate, the figure is expected to increase compared to the previous month when the Naira/Dollar rate was around N461.1/$ official rate of CBN. As we all know, a sizable portion of government revenue comes from oil exports and that is a big component that goes into the federation account.’’
Under the leadership of Yemi Cardoso, the CBN governor, M2 has been increasing steadily since September 2023, when it stood at N66.17 trillion. It rose to N72.66 trillion in October, before dropping slightly to N71.33 trillion in November.
