Nigeria’s money supply has reached N49.3 trillion, its highest level in history, but the Central Bank of Nigeria has not raised interest rates enough to control inflation and money supply.
It is alarming that the money supply is increasing despite several interest rate increases announced since July to combat inflation and reduce the quantity of money in circulation.
Analysts have attributed a rise in the money supply to the federal government’s borrowing to fund the budget, an increase in inflation, and multiple interventions by the CBN.
Professor of Capital Markets at Nasarawa State University Keffi and financial economist Uche Uwaleke said that the rising money supply is contributing to an increase in inflation and pressuring the central bank to raise its monetary policy rate (MPR).
“The CBN has recognised that the money supply is increasing, and that is the basis for the raise in MPR to 15.5 percent from 14 percent to restrain a further rise in inflation,” he said.
The CBN’s bailouts of the federal and state governments via its ways and means totaled trillions of naira, increased the money supply, and fueled a significant inflationary environment.
The data indicates that in August 2021, the Ways and Means balance was N16.1 trillion, but it increased to N22.068 trillion in August 2022. It is a yearly increase of 36%.
The commercial and public sectors, respectively, got sector credit of N40.1 trillion and N21 trillion, according to a quick analysis of the statistics. Nigeria recorded the largest-ever net domestic credit to the economy as of August 2022, at N61.1 trillion.
The study also reveals that from 2016 to 2021, Nigeria’s GDP grew by an average of 1.3%. In contrast, the money supply expanded from N23.6 trillion to N43 trillion during the same period.
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