The Federal Government’s borrowing from private sources has driven a sharp increase in Nigeria’s Broad Money Supply (M2), which surged by 51% year-on-year to reach N108.96 trillion in November 2024.
According to the Central Bank of Nigeria (CBN), this rise highlights the growing complexities in managing the country’s liquidity amidst heavy reliance on domestic borrowing.
The CBN’s Money and Credit Statistics revealed that M2 rose from N72.03 trillion in November 2023 to N108.96 trillion within a year. Broad Money Supply, which comprises cash, demand deposits, savings deposits, money market deposits, and time deposits, reflects the overall liquidity available in the economy.
Throughout 2024, the growth trajectory of M2 remained uneven. After steady increases between April and September, the supply dropped by 1.5% in October, falling from N109.4 trillion to N107.7 trillion. However, by November, the figure rebounded, rising by 1.2% to reach N108.96 trillion.
The surge in M2 was largely driven by significant increases across its components. Currency held outside banks grew substantially by 50.9% year-on-year, reaching N4.65 trillion in November 2024 compared to N3.08 trillion the previous year.
Savings deposits and time deposits also showed moderate growth, rising by 1.96% year-on-year to N72.7 trillion, up from N71.3 trillion in November 2023. Meanwhile, private sector credit expanded by 27%, climbing from N59.7 trillion in November 2023 to N75.96 trillion in November 2024.
Government borrowing played a particularly prominent role in driving these trends, with credit to the government increasing by 54% year-on-year. This figure reached N39.6 trillion in November 2024, up from N25.7 trillion the previous year.
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The sharp increase in government borrowing also contributed to a dramatic 91% year-on-year growth in net domestic credit, which soared from N60.5 trillion in November 2023 to N115.6 trillion in November 2024.
Economic experts have expressed concerns about the implications of this rising money supply. While the increase reflects a more active economy, it also poses risks of heightened inflation, higher interest rates, and increased pressure on the naira.
A financial analyst in a report by BusinessDay, described the trend as “a wake-up call for fiscal discipline,” noting that excessive reliance on domestic borrowing could undermine long-term economic stability and worsen the financial challenges faced by businesses and households.
CBN Governor Yemi Cardoso, addressing the issue, acknowledged the opportunities and risks inherent in the rise of money supply. “While the rise in money supply reflects an active economy, it underscores the need for prudent fiscal and monetary policies to manage potential risks,” he stated.
The report highlights the need for a more balanced approach to government borrowing and fiscal management to ensure sustainable economic growth.
As Nigerians continue to face the impact of rising prices and economic uncertainties, policymakers are urged to adopt strategies that mitigate risks while promoting financial stability.
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