The Central Bank of Nigeria (CBN) has revealed in its money and credit statistics that the economy’s money supply (M3) has climbed to N49.36 trillion as of August 2022, a 9.21 per cent increase or N4.16 trillion Year-to-Date (YTD) increase from the N45.19 trillion recorded in January 2022. This is against the backdrop of increasing federal government borrowings to fund the country’s massive budget imbalance.
According to CBN money and credit data, the money supply has remained on a month-on-month (MoM) growth trajectory as the federal government has continued to borrow.
According to investopedia.com, M3 is a money supply metric that includes broad money (M2) as well as significant time deposits, institutional money market funds, short-term repurchase agreements (repo), and other financial instruments. Analysts have attributed the surge in money supply to federal government borrowing to finance the budget, a hike in the inflation rate, and numerous interventions by the central bank.
They also stated that Deposit Money Banks (DBMs) lending to the private sector, fueled by the CBN’s Loan-to-Deposit Ratio (LDR) policy, is a contributor to the domestic economy’s money supply. Further examination of the CBN records revealed that key components M2 and M1 increased over the time under study.
According to the research, M2 increased by N4.22 trillion or 9.35% to N49.31 trillion in August 2022 from N45.09 trillion in January 2022, while M1 increased by N2.85 trillion or 15.31% to N21.44 trillion in August 2022 from N18.559 trillion reported by the CBN in January 2022.
According to the CBN data, M2, rose by 25.56 per cent or N9.93 trillion in its Year-on-Year (YoY) growth to N48.8 trillion as of June 2022 from N38.86trillion ending June 2021, while M1 increased by 27.26 per cent or N4.37 trillion YoY to N20.39 trillion as of June 2022 from N16.02 trillion reported June 2021.
Also contributing to the huge growth in money supply in the six months of 2022, is the increase in credit to the private sector and government during the period.
CBN data showed that credit to the government rose by 55 per cent or N6.4trillion to N17.99 trillion as of June from N11.59 trillion in the corresponding period of 2021.
According to the CBN, credit to the private sector in its Year-till-Date performance has gained 14.24 per cent to N40.19 trillion in August from N35.18trillion in January 2022.
So far in 2022, credit to the private sector has added N5.01 trillion despite severe macroeconomic challenges in the banking sector. The CBN statistics disclosed that credit to the private sector gained 0.85 per cent Month-on-Month growth from N39.85trillion in July 2022 to N40.19trillion in August.
