Nigeria is facing an increased risk of inflation as the nation's money supply (M3) surged to a record high of N101.34 trillion in June 2024. This significant increase, reported by the Central Bank of Nigeria (CBN), marks a 56.15% rise from N64.90 trillion in June 2023.
Key Data
Points:
- Current
Money Supply (M3): N101.34 trillion
(June 2024)
- Previous
Year Money Supply: N64.90 trillion
(June 2023)
- Month-on-Month
Increase: 2.11% (from N99.23 trillion in May
2024)
Analysis
by Financial Experts
Financial
analysts caution that a rising money supply often correlates with higher
inflation rates. Despite the CBN's efforts to control inflation through
monetary tightening, the substantial increase in M3 signals potential
inflationary pressures ahead.
CBN's
Monetary Policies
Since
Olayemi Cardoso assumed the role of CBN governor in September last year, the
bank has issued over N1.5 trillion in Open Market Operation (OMO) bills. This
strategy aims to curb inflation and bolster the Naira. However, the latest M3
figures suggest that these measures may not be sufficient to counteract the
inflationary trends.
Current
Economic Indicators
- Core
Inflation: 34.19% (June 2024)
- Food
Inflation: 40.87% (June 2024)
- Interest
Rates: 26.75%
Analysts
at FBNQuest commented on the M3 data, stating, “While the increase in CIC
(Currency in Circulation) 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.”
Legislative
Developments
The
National Assembly recently approved an increase in the Nigerian government's
ways and means advance threshold, raising it to 10% from 5%. This change could
further impact the country's inflation dynamics.
Currency
in Circulation (CIC)
As
of June 2024, Nigeria's currency in circulation rose to N4.05 trillion, up from
N2.60 trillion in the same period last year. This increase in CIC underscores
the broader expansion of the money supply within the economy.
Conclusion
The unprecedented rise in Nigeria's money supply poses a significant risk of exacerbating inflation. As the CBN and government navigate these economic challenges, the focus remains on balancing monetary policies to stabilize the Naira and control inflation.
No comments:
Post a Comment