The Central Bank of Nigeria (CBN) has reported that the money supply in the country in 2022 rose to an all-time high of N52.14 trillion, despite its sustained measures to reduce the volume.
In monetary terms, money supply, which is a function of the level of liquidity in an economy, comprises net foreign assets and net domestic assets.
The CBN in its latest report disclosed that in 2022, money supply into the economy rose by N8.32 trillion, representing 19% year-on-year surge from N43.82 trillion in 2021.
An analysis of the data showed the nation’s net foreign assets stood at N4.25 trillion as of December 2022, indicating a N4.56 trillion drop when compared to N8.81 trillion recorded at the end of 2021.
The data further reflected that Nigeria’s net domestic assets rose by a whopping N12.88 trillion in the review year to stand at N47.89 trillion from N35 trillion the previous year, implying that the nation’s money supply surge is driven by the surge in net domestic assets with domestic credit hitting N66.46 trillion as of the year end.
The apex bank also reported that while total credit to the government rose to N24.66 trillion, credit to the private sector increased by N6.6 trillion to stand at N41.8 trillion by the end of 2022.
On the currency in circulation, the report indicated that total currency in circulation in the economy stood at N3.01 trillion at the end of the year, representing a N313.1 billion decline compared to N3.33 trillion to the currency in circulation the previous year.
In addition, the data reflected that currency outside the banks also stood at N2.57 trillion, representing 85.2% of the total currency in circulation.
The apex bank, has over the past few years, in furtherance of its mandate, been trying to reduce the money supply amid rising inflation by jacking up the benchmark interest rate (MPR) but the impact of the hawkish approach to tame inflation rate had not been significant
For instance, the currency policy measure to withdrawal old banknotes from circulation is one of the steps taken by the apex bank and it seems the move is gradually achieving the desired results, despite the hitches the characterized the policy’s implementation over the past six weeks.
