Nigeria’s Broad Money Supply (M2) experienced a significant Year-on-Year (YoY) increase of 51%, rising to ₦108.96 trillion in November 2024 from ₦72.03 trillion in the same period of 2023.
Broad Money Supply (M2) encompasses cash, demand deposits, savings deposits, money market deposits, and time deposits. This substantial growth reflects high levels of government domestic borrowing from the private sector, as indicated by recent data from the Central Bank of Nigeria (CBN).
The CBN’s Money and Credit Statistics also revealed a fluctuating trend in M2 throughout 2024. After recording consistent growth over six months from April, M2 declined by 1.5% month-on-month (MoM) to ₦107.7 trillion in October from ₦109.4 trillion in September. It rebounded in November, increasing by 1.2% to ₦108.96 trillion.
Key Drivers of M2 Growth
The YoY increase in M2 is attributed to positive component changes:
- Quasi-Money Growth: Savings deposits, time deposits, and other near-money assets rose marginally by 1.96% YoY to ₦72.7 trillion from ₦71.3 trillion in November 2023.
- Demand Deposits Surge: Demand deposits climbed 34.4% YoY to ₦31.6 trillion in November 2024 from ₦23.2 trillion in the previous year.
- Currency Outside Banks: This category rose significantly, up by 50.9% YoY to ₦4.65 trillion in November 2024 compared to ₦3.08 trillion in November 2023.
Narrow Money (M1), which includes physical cash and demand deposits, also recorded robust growth, increasing by 38% YoY to ₦36.3 trillion in November 2024 from ₦26.3 trillion in November 2023.
Credit Expansion and Domestic Borrowing
Credit to the government grew by 54% YoY, reaching ₦39.6 trillion in November 2024, up from ₦25.7 trillion in 2023. Similarly, credit to the private sector rose by 27% YoY to ₦75.96 trillion in November 2024 from ₦59.7 trillion in 2023.
These increases contributed to a 91% YoY surge in net domestic credit, which totaled ₦115.6 trillion in November 2024 compared to ₦60.5 trillion in the same period of 2023.
Debt and Revenue Challenges
According to Afrinvest West Africa Limited, the Federal Government (FG) borrowed an estimated ₦41.5 trillion in 2024 from domestic and external sources, including the Naira equivalent of a recent Eurobond issuance.
Budgeted revenue for 2024 is projected to underperform by at least 25%, driven by disappointing crude oil output at 1.40 million barrels per day (mbpd) versus the budgeted 1.78 mbpd. Despite this, non-oil tax revenue outperformed expectations by 60.1%, generating ₦3.8 trillion.
Debt servicing accounted for the largest share of government spending at 43.7%, followed by non-debt recurrent expenditure at 28.9%. Consequently, the FG’s total debt profile is estimated to reach ₦128 trillion, while the cumulative national debt is projected at ₦138 trillion.
Afrinvest further estimates that the actual deficit for 2024 will surpass the budgeted ₦9.2 trillion by 72.8%, should the total expenditure plan of ₦35.1 trillion be fully executed.
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