Nigeria’s Broad Money Supply (M2) saw an impressive 51% year-on-year (YoY) growth, climbing to N108.96 trillion in November 2024. This surge, primarily driven by Federal Government borrowing from the private sector, reflects deepening fiscal challenges linked to domestic borrowing.
Data from the Central Bank of Nigeria (CBN) Money and Credit Statistics revealed this increase from N72.03 trillion recorded in November 2023.
Understanding Broad Money Supply (M2)
Broad Money Supply (M2) includes various monetary components such as cash, demand deposits, savings deposits, time deposits, and money market deposits, which collectively indicate liquidity within the economy.
Trends in Money Supply
The CBN reported a consistent six-month growth in M2 from April 2024. However, there was a slight drop in October, with M2 falling month-on-month (MoM) by 1.5% to N107.7 trillion from September’s N109.4 trillion. The trend reversed in November, as M2 grew by 1.2%, reaching N108.96 trillion.
Breakdown of Growth Components
The YoY growth in M2 was fueled by increases across key components:
- Savings and Time Deposits:
- Grew by 1.96% YoY to N72.7 trillion (November 2024) from N71.3 trillion (November 2023).
- Currency Outside Banks:
- Witnessed a significant 50.9% YoY rise, increasing to N4.65 trillion from N3.08 trillion.
- M1 (Narrow Money):
- Expanded by 38% YoY, reaching N36.3 trillion in November 2024 from N26.3 trillion in November 2023.
Credit Allocation Increases
The report highlighted substantial credit expansions:
- Government Borrowing:
- Soared by 54% YoY to N39.6 trillion, up from N25.7 trillion in November 2023.
- Private Sector Credit:
- Increased by 27% YoY to N75.96 trillion, compared to N59.7 trillion in November 2023.
- Net Domestic Credit:
- Skyrocketed by 91% YoY, reaching N115.6 trillion in November 2024 from N60.5 trillion a year earlier.
Implications and Policy Recommendations
This sharp rise in money supply underscores the growing reliance on domestic borrowing. While it meets short-term financing needs, unchecked borrowing can lead to inflationary pressures, higher interest rates, and long-term economic instability. To mitigate these risks, there is an urgent need for improved fiscal discipline and effective monetary policy to balance liquidity and economic stability.
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