Nigeria’s inflation might worsen as the country’s Money Supply (M3), which measures the total amount of money in the economy, reached a record high of ₦101.34 trillion in June 2024, according to recent data from the Central Bank of Nigeria (CBN). This marks a 56.15 percent increase from ₦64.90 trillion in June 2023. Financial analysts warn that an increase in money supply can lead to higher inflation. On a month-on-month basis, the money supply rose by 2.11 percent from ₦99.23 trillion in May 2024.
This increase in M3 persists despite the CBN’s 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 strengthen the Naira.
In June 2024, Nigeria’s core and food inflation stood at 34.19 percent and 40.87 percent, respectively, while interest rates were at 26.75 percent. Analysts at FBNQuest noted that while an increase in Currency in Circulation (CIC) may indicate improved economic activity and higher consumer spending, it also raises the risk of inflation if money supply growth outpaces real output growth.
Additionally, the National Assembly recently raised the Nigerian government’s ways and means advance threshold from 5 percent to 10 percent. As of June 2024, Nigeria’s CIC increased to ₦4.05 trillion from ₦2.60 trillion the previous year.
Peoplesmind
