Data on demand deposits from the Central Bank of Nigeria’s website shows that they increased by 206.83 percent from N9.67 trillion in May 2019 to N29.67 trillion in May of this year.
According to the statistics, the nation’s demand deposits increased to N10.57 trillion in May 2020 from 9.31% growth in May 2019, despite the COVID-19 pandemic’s negative impact on the world economy.
The rise persisted throughout 2021 and beyond, peaking early in 2023. Increased economic activity, government stimulus programs, and improved banking system liquidity are some of the factors driving the expansion.
An economist at Lotus Beta Analytics, Shedrach Israel, noted in a conversation with our correspondent on Friday that the surge in demand deposits signified robust consumer confidence and liquidity in Nigeria’s financial system.
“It reflects heightened economic activities, investments, and savings mobilisation within the country, supporting lending activities and stimulating economic growth,” he adds.
However, the rising trend in demand deposits also raises considerations for monetary policymakers, necessitating vigilant monitoring to ensure financial stability, manage inflationary pressures, and sustain long-term economic growth.
Experts noted that while the growth in demand deposits reflected a resilient financial sector, it also required careful management to mitigate potential risks and ensure sustainable economic development.
An analyst at Phemmy Gracey Limited, Olorunfemi Idris, noted that the increase in demand deposits had important implications for the economy, providing banks with more funds to lend and potentially boosting credit availability and economic growth.
However, he also raised concerns about inflation and the potential surge in the money supply, which could lead to economic instability if not managed properly.
