How FG’s borrowings increase money supply by 51% to N108.96trn — CBN

Nigeria’s Broad Money Supply (M2) experienced a substantial 51% year-on-year (YoY) increase, reaching N108.96 trillion in November 2024, driven primarily by domestic borrowing by the Federal Government from the private sector. This surge highlights the growing financial complexities stemming from government borrowing practices.

Data from the Central Bank of Nigeria’s (CBN) Money and Credit Statistics, released on Monday, revealed that this figure marked a significant jump from N72.03 trillion recorded in the same period in 2023.

Broad Money Supply (M2) encompasses various monetary assets, including cash, demand deposits, savings deposits, money market deposits, and time deposits, reflecting the liquidity available within the economy.

The CBN report detailed a steady six-month increase in M2 starting from April 2024. However, a decline was noted in October 2024, with M2 dropping month-on-month (MoM) by 1.5% to N107.7 trillion from N109.4 trillion in September. By November, the supply rebounded, registering a 1.2% increase to reach N108.96 trillion.

The YoY growth in M2 was driven by increases across its components:

Savings deposits, time deposits, and other near-money assets rose marginally by 1.96% YoY to N72.7 trillion in November 2024, up from N71.3 trillion in November 2023.

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These surged by 34.4% YoY, climbing to N31.6 trillion in November 2024 compared to N23.2 trillion a year earlier.Currency held outside banks experienced a significant 50.9% YoY growth, increasing to N4.65 trillion in November 2024 from N3.08 trillion in November 2023.

M1 expanded considerably by 38% YoY, reaching N36.3 trillion in November 2024, compared to N26.3 trillion in November 2023

The report also highlighted notable increases in credit allocations:

Government borrowing recorded a sharp 54% YoY rise, amounting to N39.6 trillion in November 2024, up from N25.7 trillion in November 2023.

Private sector credit rose by 27% YoY, reaching N75.96 trillion in November 2024 compared to N59.7 trillion a year earlier.

These credit expansions contributed to a dramatic 91% YoY increase in net domestic credit, which soared to N115.6 trillion in November 2024 from N60.5 trillion in November 2023.

The significant rise in the money supply, driven by government borrowing, underscores the need for fiscal discipline and effective monetary policy measures. The sharp growth in credit allocations, particularly to the government, highlights the reliance on domestic borrowing, which may have long-term implications for inflation, interest rates, and overall economic stability.

NIGERIAN TRIBUNE