Nigeria’s Inflation Could Worsen as Money Supply Reaches N101.34 Trillion

Nigeria’s inflation may worsen as the country’s money supply (M3) reached an all-time high of N101.34 trillion in June 2024, according to recent data from the Central Bank of Nigeria (CBN). The M3 figure represents a 56.15 percent increase from N64.90 trillion recorded in June 2023.

Financial analysts warn that an increase in money supply can lead to higher inflation. On a month-on-month basis, the money supply grew by 2.11 percent, rising from N99.23 trillion in May 2024. This increase occurred despite the CBN’s monetary tightening measures, including issuing over N1.5 trillion in Open Market Operation (OMO) bills under Governor Olayemi Cardoso’s leadership since September last year, aimed at curbing inflation and strengthening the Naira.

In June 2024, Nigeria’s core and food inflation rates were 34.19 percent and 40.87 percent, respectively, with interest rates at 26.75 percent. Analysts at FBNQuest noted, “While the increase in CIC 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.”

This development comes as the National Assembly recently raised the government’s ways and means advance threshold to 10 percent from 5 percent. As of June 2024, Nigeria’s currency in circulation (CIC) increased to N4.05 trillion from N2.60 trillion in the same period last year.