Nigeria’s Inflation May Worsen As Money Supply Hits ₦101.34 Million

Nigeria’s Inflation is poised to escalate further, as the nation’s Money Supply (M3), which quantifies the total volume of currency within an economy, has reached an unprecedented high of ₦101.34 million in June 2024.

Data obtained from the latest publication by the Central Bank of Nigeria (CBN) reveals a significant increase in M3, surging by 56.15 per cent to ₦101.34 million from N64.90 trillion observed in the corresponding period of June 2023.

Financial analysts posit that an expansion in the money supply can precipitate an increase in inflation rates.

On a monthly basis, the volume of M3 rose by 2.11 per cent, reaching N99.23 trillion from N99.23 trillion in May 2024.

This surge in M3 occurred despite the Central Bank of Nigeria’s (CBN) efforts to tighten monetary policy.

Since the appointment of Olayemi Cardoso as governor of the apex bank in September of the previous year, the CBN has issued over N1.5 trillion in Open Market Operation (OMO) bills aimed at curbing inflation and bolstering the Nigerian Naira.

In June 2024, the country experienced core and food inflation rates of 34.19 per cent and 40.87 per cent, respectively, alongside an interest rate of 26.75 per cent.

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Commenting on the M3 data, analysts at FBNQuest said, “While the increase in CIC may suggest improved economic activity in nominal terms and higher consumer spending, it also highlights the risk of inflation, particularly if money supply growth exceeds real output growth.”

This development is occurring in the context of the recent amendment by the National Assembly, which has raised the threshold for the Nigerian government’s ways and means advance to 10 percent, up from the previous 5 per cent.

As of June 2024, the currency in circulation (CIC) in Nigeria has experienced a significant increase, reaching N4.05 trillion, a notable rise from the N2.60 trillion recorded in the same period of the previous year.