Nigeria’s Broad Money Supply (M2) grows by 51% year-on-year (YoY), reaching ₦108.96 trillion in November 2024. The increase is linked to higher domestic borrowing by the Federal Government, marking a substantial rise from ₦72.03 trillion recorded in November 2023, according to data from the Central Bank of Nigeria (CBN).
M2, a measure of the economy’s liquidity, includes cash, demand deposits, savings accounts, money market instruments, and time deposits.
Although M2 sustains steady growth for six months in 2024, it dips by 1.5% in October before recovering in November with a 1.2% increase, reaching its highest level for the year.
Factors Driving Liquidity Growth
The rise in Broad Money Supply is supported by gains in its key components:
- Quasi Money: Savings and time deposits grow marginally by 1.96% YoY, reaching ₦72.7 trillion in November 2024 from ₦71.3 trillion in the previous year.
- Demand Deposits: These increase significantly by 34.4%, totaling ₦31.6 trillion compared to ₦23.2 trillion in November 2023.
- Currency Outside Banks: This sees a sharp rise of 50.9%, amounting to ₦4.65 trillion in November 2024, up from ₦3.08 trillion the prior year.
- Narrow Money (M1): Comprising cash and demand deposits, M1 grows by 38%, reaching ₦36.3 trillion from ₦26.3 trillion in November 2023.
Domestic Credit Expansion
The CBN data shows a significant increase in credit allocation to the government and private sector:
- Government Credit: Loans to the government rise by 54% YoY, totaling ₦39.6 trillion in November 2024 compared to ₦25.7 trillion in November 2023.
- Private Sector Credit: Credit to businesses grows by 27% YoY, reaching ₦75.96 trillion from ₦59.7 trillion in the prior year.
Together, these increases push net domestic credit up by 91% YoY to ₦115.6 trillion in November 2024, compared to ₦60.5 trillion in November 2023.
Economic Implications
The growth in money supply reflects the government’s reliance on domestic borrowing to address fiscal challenges. While increased liquidity supports economic activity, it raises concerns about potential inflationary pressures.
Economists stress the need for a cautious and strategic approach to fiscal and monetary policies to manage the liquidity expansion. This strategy is essential to achieving sustainable economic growth while avoiding inflationary risks and other long-term economic imbalances.
 grows by 51% year-on-year (YoY), reaching ₦108.96 trillion in November 2024. The increase is linked to higher domestic borrowing by the Federal Government, marking a substantial rise from ₦72.03 trillion recorded in November 2023, according to data from the Central Bank of Nigeria (CBN).){kind=link}