Nigeria’s total money supply (M2) grows by 1.9% to ₦66.4 trillion

Since the country’s apex bank, the Central Bank of Nigeria (CBN) initiated its expansive monetary policy during the COVID-19 pandemic in 2020, Nigeria’s money supply has witnessed a steady increase.

M2 is described as the total amount of money available in the economy at a particular moment and includes quasi-money, currency outside banks, and demand deposits. 

This has maintained a consistent upward trend from early this year, 2023 and includes physical currency such as coins and banknotes, in addition to various types of deposits maintained by individuals, enterprises, and institutions in banks and other financial entities.

As seen on the CBN website, a breakdown of the Money and Credit Statistics data showed that the money supply from the quasi-money assets increased by 24.87% Year-to-Date to ₦39.86 trillion in June 2023 compared to ₦31.92 trillion in January this year.

Among the factors responsible for the steady spike in M2 include the devaluation of the naira following forex unification in June which effectively added close to ₦10 trillion to the money supply, spending by the FG, growth in proceeds from the Federation Account Allocation Committee (FAAC) to the three tiers of government.

Further analysis showed growth and decline in certain components of the money supply namely demand deposits, quasi-money and currency outside banks.

Quasi-money is used to describe highly liquid assets that can easily be converted into cash quickly with minimal losses. These include certificates of deposits, treasury bills, savings accounts, money market securities, foreign currencies, etc.

This shot up from ₦40.8 trillion in the month of August 2023, to ₦41 trillion. 

Demand deposits moved from ₦21.7 trillion to ₦23 trillion while currency outside banks observed a slight increment from ₦2.29 trillion to ₦2.3 trillion.

Net Foreign Assets, however, witnessed a huge drop from ₦7.1 trillion to just ₦591 billion while Net Domestic Assets increased to ₦66.5 trillion from ₦58.3 trillion. 

The continuous rise in money supply increases the inflationary pressure which will automatically decrease the citizens' purchasing power.

According to Nairametrics, increased money supply might result in declining interest rates, especially with the reduced investment assets which would make Nigerian assets less enticing to overseas investors.