The Central Bank of Nigeria (CBN) has reported that money supply in the country dipped in February to N110.32 trillion from N110.94 trillion supplied to the economy in the preceding month, representing 0.56% month-on-month (M-o-M) drop.
The drop in money supply in February was witnessed as the apex bank sustained its hawkish policy stance to effectively manage liquidity in the economy.
According to the apex bank’s report, despite the drop of supply in the month under review, the figure still remains higher than the N95.56 trillion supplied in February 2024, indicating 15.45% surge year-on-year (Y-o-Y)
The increase in M3 money supply in February this year, which includes both net foreign assets and net domestic assets, gave some broader insight into the government’s monetary policies and reflected emerging developments in both foreign reserves and domestic credit.
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A further analysis of the money supply figures indicated that Nigeria’s net foreign assets dropped by 8.62% to N32.34 trillion in February from N35.39 trillion in the preceding month, representing about N3 trillion that may be linked to either lower external reserves or increased foreign exchange (FX) interventions by the apex bank in its strive to moderate the volatility of the FX markets.
The report, however, showed that the net domestic assets rose to N77.97 trillion in February from N75.55 trillion in January, suggesting continued credit expansion within the economy.
This is even as Nigeria’s net foreign assets increased from N7.41 trillion recorded in February 2024 by over 337% in February this year, reflecting the positive effects of the CBN’s exchange rate reforms and improved foreign exchange inflows.
Meanwhile, broad money supply (M2), also marginally declined in February to N110.31 trillion from N110.93 trillion in January.
When analyzed on a Y-o-Y basis, M2 rose by 17.39% in February this year up from N93.97tn in February last year, reflecting a broader expansion in money supply over the period in alignment with government’s increased spending and other fiscal measures.
Conversely, the CBN report showed that narrow money supply, which includes currency in circulation and demand deposits, rose to N37.57 trillion in February this year from N36.77 trillion supplied in January, indicating a marginal increase of 2.18%.
When compared to the N30.28 trillion narrow money in February 2024, the February this year’s figures represented a growth rate of 24.07% Y-o-Y.
The surge could partly be attributed to higher cash transactions and short-term liquidity needs of Nigerians in the face of inflationary pressures and FX volatility, among other factors.
