By Sodiq Adelakun
The country’s total money supply (M2) increased to N66.4 trillion in September 2023, according to data released by the Central Bank of Nigeria.
M2 represents the total amount of money available in the economy at a given time, including physical currency like coins and banknotes, as well as deposits held by individuals, businesses, and institutions in banks and other financial institutions.
Nigeria’s money supply has been on the rise since the central bank began its expansive monetary policy stand in the wake of the COVID-19 pandemic.
Since September 2020, Nigeria’s money supply has doubled from N29 trillion before the lockdown (February 28th). However, the rise has been rapid in the last 12-18 months rising by about 34.6 percent year on year.
The increase in money supply was also a result of the devaluation of the naira following forex unification in June, The policy effectively added close to N10 trillion to the money supply.
Key highlights of the data
M2 Breakdown – A closer look at the data reveals that certain components of the money supply, namely demand deposits, quasi-money, and currency outside banks, also witnessed growth and declines.
Specifically, quasi-money, which pertains to financial tools that can be easily converted to cash, surged from N40.8 trillion in the month of August 2023 to N41 trillion.
Moreover, demand deposits, primarily made up of chequing accounts or funds in banks accessible without prior notice, moved from N21.7 trillion to N23 trillion.
Meanwhile, currency outside banks observed a relatively modest increment from N2.29 trillion to N2.3 trillion.
One major observation was the drop in Net Foreign Assets which went from N7.1 trillion to just N591 billion while Net Domestic Assets rose to N66.5 trillion from N58.3 trillion.
The money supply is the summation of the net domestic assets and net foreign assets.