Nigeria’s Money Supply (M3) grew 42.76 percent to N113.14 trillion in Q4 2024.

Nigeria’s broad money supply (M3), which measures the total amount of money available in the economy, surged by 42.76% to ₦113.14 trillion, this was revealed in the Central Bank of Nigeria (CBN) economic report for the fourth quarter of 2024.

The report revealed a dynamic growth in Nigeria’s monetary landscape characterized by rapid money supply growth, a resilient banking sector, and a buoyant capital market.

Monetary Expansion Hits New Heights

Monetary expansion accelerated in Q4 2024, with the broad money supply (M3) surging by 42.76% to ₦113.14 trillion, from a decline in the money multiplier from 3.89 in September to 3.46 in December.

This growth was driven by significant increases in net foreign assets (NFA) and net domestic assets (NDA).

NFA soared by 193.61% to ₦27.42 trillion, contributing 22.81 percentage points (pp) to M3 growth, a marked jump from its 108.79% rise in Q3.

NDA, meanwhile, grew by 22.61% to ₦85.72 trillion, adding 19.95 pp, fueled by a 20.55% increase in claims on other sectors, despite a 4.48% drop in net claims on the central government.

On the liability side, M3 growth was propelled by rises in currency outside depository corporations (49.20%), transferable deposits (25.19%), and other deposits (53.13%), with the latter contributing the most at 32.65 pp. However, a 95.87% decline in securities other than shares moderated the expansion by 0.51 pp.

Reserve money also expanded by 32.09% to ₦32.67 trillion, exceeding the 2024 benchmark of ₦28.27 trillion by 15.56%. This was driven by a 48.94% increase in currency-in-circulation (CIC) to ₦5.44 trillion and a 29.17% rise in liabilities to other depository corporations (ODCs) to ₦27.23 trillion.

Notes and coins within CIC grew by 26.33% to ₦5.42 trillion, while the eNaira dipped slightly by 0.19% to ₦18.31 billion.

Credit Trends: Sectoral Shifts and Consumer Borrowing

Credit utilization across key sectors rose modestly by 1.11% to ₦59.21 trillion. The services sector, commanding 55.21% of total credit, increased by 5.15% to ₦32.69 trillion, while agriculture saw a robust 23.38% rise to ₦2.85 trillion (4.82% share).

In contrast, industry credit fell by 5.96% to ₦23.67 trillion, reflecting a potential reorientation of economic priorities.

Consumer credit grew by 11.06% to ₦4.72 trillion, driven by a 21.27% surge in personal loans to ₦3.82 trillion, though retail loans declined by 18.18% to ₦0.90 trillion.

Banking System Faces Liquidity Squeeze

Banking system liquidity tightened, with the average net industry balance dropping by 6.25% to ₦0.15 trillion from ₦0.16 trillion in Q3.

This was attributed to monetary operations such as standing lending facility (SLF) repayments, cash reserve ratio (CRR) debits, sales of Nigerian Treasury Bills (NTBs) and open market operations (OMO).

SLF transactions jumped to ₦44.83 trillion from ₦27.95 trillion, with a daily average of ₦0.73 trillion, while standing deposit facility (SDF) transactions fell slightly to ₦15.00 trillion, with a daily average of ₦0.24 trillion.

Despite this, financial indicators remained strong, with the capital adequacy ratio (CAR) rising to 15.20% (above the 10-15% benchmarks), non-performing loans (NPL) dropping to 4.50% (below the 5% threshold), and the liquidity ratio (LR) climbing to 49.06% (above the 30% minimum).

Capital Market Thrives Amid Rising Interest Rates

The capital market exhibited strong momentum, with aggregate market capitalization increasing by 6.19% to ₦109.29 trillion. Equities rose by 10.80% to ₦62.76 trillion (57.43% share), and debt grew by 0.54% to ₦46.50 trillion, though Exchange Traded Funds (ETFs) fell by 9.99% to ₦29.19 billion.

The All-Share Index (ASI) climbed by 3.85% to 102,350.25 points, driven by new listings, year-end portfolio rebalancing, and optimism about 2025 economic prospects. Trading value surged by 26.24% to ₦785.64 billion, despite a 9.29% drop in volume to 34.36 billion shares.

NTB subscriptions soared to ₦6.73 trillion (from ₦4.19 trillion in Q3), with ₦3.39 trillion allotted, reflecting higher stop rates of 19.90% . FGN Bond subscriptions, however, declined to ₦1.04 trillion from ₦1.15 trillion, with ₦0.85 trillion allotted at a marginal rate of 21.38%

Short-term interest rates rose, with the open buy-back (OBB) rate at 29.85% and NIBOR at 27.91%, though the interbank call rate dipped to 28.71%. Lending rates also increased, with prime and maximum rates at 18.10% and 30.35%, respectively, widening the spread with the term deposit rate (9.67%) to 20.68 pp.

Implications for Nigeria’s Economy

The Q4 2024 report underscores a period of vigorous monetary growth, underpinned by a strong external position (via NFA) and domestic credit expansion (via NDA).

However, the decline in the money multiplier and banking liquidity suggests potential limits to this expansion without risking inflation or financial instability.

A 42.76% surge in Money supply (M3) represents a monetary expansion that typically correlates with inflation if not matched by equivalent growth in goods and services.

The spike in currency outside depository corporations and CIC (currency in circulation) suggests more cash is circulating outside financial institutions, which can fuel inflation.

Heavy CRR debits and aggressive OMO operations hint that the CBN is already attempting to mop up excess liquidity.

With industry credit falling by 5.96%, credit is flowing more into consumption and services than production, which could undermine industrial growth and job creation long-term.

Investor confidence in Nigeria’s Financial markets is improving with high yields on Nigerian treasury bills (19.90%) and FGN bonds (21.38%), reflecting a tight monetary environment and higher borrowing costs for the government. This could attract more foreign portfolio investment, which can stabilize the exchange rate in the short run.

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