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Money supply surge to N64.36 trillion in June

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By Usman Oladimeji

M2 has increased by 21.81 percent from N52.84 trillion in January.

In a recent report, data gathered in June 2023 shows that Money supply (M2) surged to a staggering N64.36 trillion in the month, up stupendously by 31.62 percent from its previous value of N48.9 trillion in June 2022. This comes after the rising distribution of Federation Account Allocation Committee (FAAC) funds to the three tiers of government. According to an analysis of CBN data classified as “Economic Confidential,” M2 has increased by 21.81 percent (Year-till-Date) since January 2023, when it was reported to be at N52.84 trillion.

There has been a constant increase trend in the money supply (which includes demand deposits, currency not held by banks, and quasi-money) since the beginning of 2023. Deep analysis of the Money and Credit Statistics published by the Central Bank of Nigeria (CBN) revealed that money supply as measured by extremely liquid and easily convertible quasi-money assets increased by 24.87 percent YTD to N39.86 trillion in June 2023, up from N31.92 trillion in January of this year.

FAAC distributed N907 billion as revenue in June.

Whereas the amount of cash available outside of banks rose from N792.18 billion in January 2023 to N2.26 trillion in June 2023, a year-over-year growth rate of 185.67 percent. A further dive into the CBN data revealed a troubling trend: a large sum of Naira notes, totaling N2.73 trillion, is being held by the people outside the vaults of commercial banks. Demand deposits, which are money kept in bank accounts and may be withdrawn whenever they’re needed without advance notice, also increased dramatically, up 11% YTD to N22.23 trillion in June 2023 from N20.12 trillion in January.

Government spending, according to analysts, is partially responsible for the rise in the money supply (M2). In May 2023, the FAAC allocated N786.161 billion as Federation Account revenue to the Federal Government (FG), the States Government, and the Local Governments (LG). In June of that same year, the FAAC distributed N907 billion, representing a rise of N130.230 billion over April 2023 disbursement of N655.93 billion. When compared to January’s distribution of N1.14 trillion, this month’s N907billion comes as the second highest.

Business activities fell in the first quarter of 2023.

CBN Money and Credit Statistics found that total cash in circulation as at June 2023 was N2.6 trillion, up by 87 percent from N1.39 trillion in January. It was also reported that the private sector credit rose to N52.81 trillion in June 2023 from N41.54 trillion in January 2023, notwithstanding the country’s slow pace experienced in economy growth. The credit to the private sector increased by 3.7 percent in Q1 2023, or N1.5 trillion, compared to 3.65 percent, or N1.28 trillion, in Q1 2022.

The reported N52.81 trillion in credit to the private sector is the highest ever recorded, with expectations to rise even more this year, according to economic confidential assessments. Business activities in the country fell in the first quarter of 2023 due to political turmoil, a shortage of the currency, and fuel scarcity. Consequently, owing to the Q1 sluggish economic activity, the country’s business climate declined at a rapid rate, with pricing pressures rising even higher in March 2023 and interest rates reaching a new all-time high.

Economy began to recover in the second quarter.

Also, in the first two months of 2023, credit growth slowed marginally from the fourth quarter of 2022, and FDI fell precipitously in 2022 due to the US dollar shortage, which caused some businesses to scrap their expansion plans. However, after the presidential election in February, the economy began to recover in the second quarter. Despite these setbacks, private sector credit has increased by 27.13 percentage points, or N11.27 trillion YTD, from N41.54 trillion in June 2022 to N52.8 trillion in June 2023.


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