Nigeria’s Money Supply Reached N53.27 Trillion In January 2023
Amidst efforts by the CBN to reduce liquidation in the economy, Nigeria’s money supply hit another all-time high of N53.27 trillion in January 2023, up from the N52.14 trillion recorded in December 2022. It also represents a 19% increase from January 2022.
The money supply is defined by Investopedia as the total of all of the currency and other liquid assets in a country’s economy on the date measured. The money supply encompasses both physical currency in circulation and all types of bank deposits that can be readily converted into cash by the account holder. It comprises money within the country and money from outside the country.
As of January 2023, Nigeria’s net domestic asset increased to N48.7 trillion, up from N35 trillion in January 2022. And foreign assets were reduced to N4.5 trillion down from N8.3 trillion in January 2022 suggesting a decrease in foreign investments in the country.
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The primary reason for the decrease in foreign assets in Nigeria is the reduction in foreign exchange earnings, which represents the revenue generated from exports, remittances, foreign investments, and other international trade activities.
As of January 31, 2023, the amount of currency in circulation, as reported by the CBN, was N1.54 trillion, indicating a 52% decrease from the N3.23 trillion that was in circulation before the announcement of the Naira redesign in October 2022. According to the CBN, the currency outside the vault of banks is about N1.13 trillion.
As of January 2023, domestic credit to the economy increased to N68.9 trillion, marking a rise from N54.4 trillion in January 2022. N24.7 trillion is the current amount of credit to the government, showing an increase of N11.3 trillion. Additionally, credit to the private sector has risen by N6.6 trillion and now stands at N42.2 trillion.
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Despite the efforts of the CBN to reduce the money supply and curb inflationary pressures, the money supply has continued to rise since August 2022. The CBN has undertaken several measures, one of which involves increasing the benchmark interest rate on four occasions in 2022, raising it from 13% to 16.5%, and subsequently to 17.5% in January 2023.
The upsurge in money supply has its benefits as it may result in better financing opportunities for individuals and businesses, which, in turn, could stimulate investment and growth. Nevertheless, there are also drawbacks to this, as it can generate inflationary pressures that cause an upsurge in the cost of goods and services. Increased inflation is bound to impact consumers’ purchasing power and influence the demand for goods and services.