Why currency in circulation spiked close to N100 trillion

4 months ago 12

The Nigerian economy has seen a spike in money supply in May 2024 despite CBN’s measure to control inflation
Data from CBN shows that the money supply increased in May 2024 by two percent at N99.24 trillion
Nigeria’s money supply has risen steadily, driven by government spending and boisterous economic activities

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment, and the economy for over a decade.

Nigeria’s money supply has risen close to N100 trillion in May 2024, at N99.24 trillion.

Data from the Central Bank of Nigeria (CBN) reveals a monthly increase of 2% from N96.97 trillion recorded the previous month and a yearly growth of 78% from N55.69 trillion in the same month the year before.

Nigeria’s money supply rises monthly

The increase comes amid CBN’s tightening of its monetary policy to control inflation.

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Reports say that apart from March this year, Nigeria’s money supply has risen steadily despite the CBN’s moves to tame inflation through interest rate hikes.

The May 2024 figure exceeded the previous one recorded in April after a slight decline in March this year.

Findings show that the increase in net domestic assets drove the spike in money supply in May this year.

The CBN data shows that net domestic assets rose by 23% from N68.25 trillion in April 2024 to N83.9 trillion.

Government spending drives surge in money supply

Net assets decline by 47% to N15.35 trillion in May 2024 from N28.73 trillion in the previous month.

The money supply comprises net assets and net domestic assets, which shows the nation’s monetary dynamics.

Experts say that despite CBN’s tough stance against inflation, the money supply has surged, showing that the apex bank needs to think outside the box.

They say the continued increase in money supply is due to excess spending by the government.

The silver lining for businesses

According to reports, with more money in circulation, it will be easier for businesses to access credit for expansion and investment, leading to higher productivity, job creation, and economic development.

Ishaya Ibrahim, a financial expert and journalist, said that high liquidity drives economic growth but must be carefully regulated so as not to cause hyperinflation.

“Nigeria is currently battling high inflation and more money in circulation means fewer goods would be purchased at higher costs. So, the CBN and other agencies need to be on the lookout for signs that could trigger hyperinflation,” he said.