Nigeria faces potential inflationary pressures as the country’s money supply (M3), which represents the total money within the economy, surged to an unprecedented ₦101.34 trillion in June 2024.
Recent data from the Central Bank of Nigeria (CBN) highlights that M3 rose by 56.15% compared to ₦64.90 trillion in June 2023. Financial experts caution that an increase in money supply can often lead to higher inflation rates.
Month-over-month, the money supply grew by 2.11%, up from ₦99.23 trillion in May 2024, despite the CBN’s efforts to control inflation through monetary tightening measures.
Since Olayemi Cardoso became governor in September last year, the CBN has issued over ₦1.5 trillion in Open Market Operation (OMO) bills to curb inflation and stabilize the Naira.
As of June 2024, Nigeria’s core inflation rate was 34.19%, with food inflation at 40.87%, and interest rates remained high at 26.75%.
FBNQuest analysts commented on the M3 figures, noting that while an increase in currency in circulation (CIC) might indicate greater economic activity and consumer spending, it also poses a risk of inflation, particularly if money supply growth outpaces real economic output.
This situation follows the National Assembly’s recent decision to raise the government’s ways and means advance threshold from 5% to 10%. By June 2024, Nigeria’s currency in circulation had risen to ₦4.05 trillion, up from ₦2.60 trillion in the previous year.
