By Milcah Tanimu
Nigeria’s money supply (M3) reached an all-time high of N106.27 trillion in July 2024, despite the Central Bank of Nigeria’s (CBN) efforts to tighten monetary conditions. This represents a 62.66% increase compared to N65.33 trillion in July 2023. On a month-to-month basis, M3 rose by 4.74% from N101.46 trillion in June 2023.
An increase in money supply can trigger higher inflation as more money chases the same amount of goods and services, causing prices to rise and reducing household purchasing power. Analysts warn that Nigerians may face higher costs for everyday items due to this surge in money supply.
The CBN has utilized various monetary tools, such as Open Market Operations (OMO), treasury bills, and adjustments to the Monetary Policy Rate (MPR), to combat inflationary pressures. At its last Monetary Policy Committee (MPC) meeting in July 2024, the MPR was raised by 50 basis points to 26.75%, up from 26.25% in June 2024.
**Currency in Circulation and Credit Trends**
Currency in circulation (CIC) jumped to N4.053 trillion in July 2024, marking a 56.18% increase from N2.595 trillion in July 2023. Meanwhile, currency outside banks (COBs) dropped to N3.66 trillion, a 3.43% decrease compared to N3.79 trillion in June 2023, but it grew by 65.61% year-on-year from N2.21 trillion in July 2023.
Net credit to the government fell significantly by 31.19%, dropping to N19.006 trillion in July 2024 from N27.621 trillion in June 2023. However, credit to the private sector continued to rise, reaching N75.48 trillion in July 2024, a 33.69% increase compared to N56.46 trillion in June 2023.
Muda Yusuf, CEO of the Promotion of Private Enterprise, explained that the high demand for loans is driven by the rising cost of goods and services, with businesses needing more credit to maintain operations despite escalating prices.
**CBN’s Future Monetary Actions**
Looking ahead, the CBN plans to issue N2.20 trillion in treasury bills during the fourth quarter of 2024, matching the amount maturing between September and November. Under Governor Olayemi Cardoso’s leadership, the CBN has already issued N1.5 trillion in OMO bills, reflecting a proactive approach to managing liquidity in the economy.
With the Monetary Policy Committee (MPC) set to convene soon, there is mounting pressure on the Naira, and many expect a further rate hike to address ongoing economic challenges.
