Analysts raise concern over N107trn money supply

A group of analysts at CFG Advisory have raised concern over 100 per cent increase in money supply in 2023 to N107 trillion as of August 2024.

Nigeria’s money supply surged to a new high of N107. 1 trillion in August 2024, marking a 0.75per cent month-on-month (M-o-M) increase from N106. 3 trillion in July and a 5.6per cent rise from N101. 4 trillion in June, according to the latest figures from the Central Bank of Nigeria (CBN).

The analysts stressed that there is a direct correlation over the last 10 years between the increase in money supply and a spike in inflation rate in Nigeria.

Adetilewa Adebajo, who led other analysts at CFG Advisory in a report titled, “Nigeria’s problem in M3” also raised concern over the CBN’s Open Market Operations (OMO) with N7.3 trillion mopped up in the last nine months, increased CRR from 32.5-50 per cent and nearly 900 basis points MPR increase from 18.75 per cent to 27.25 per cent both in the past year, without significant and money supply.

“The expected N20 trillion 2024 budget deficit will further exacerbate the situation,” the report added.

They, however, urged that reduction of inflation remains a priority despite the manufacturing sector lobby group’s opposition to the CBN’s tightening stance.

The World Bank economic team at the recently concluded Nigerian Economic Summit stirred controversy by stating that Nigeria has to stay the course of reforms for the next 10-15 Years to achieve any meaningful results.

They also went further to endorse the government’s economic reform program and pledged support.

“We do not agree with the World Bank’s position and timeline. The pronouncements are not backed by credible research or evidenced by data sets in its latest Nigerian economic report. It is however time for a reality check, as the control levers for economic growth and development, rest firmly in the hands of the Nigerian government.

“The reform program while commendable has not been implemented properly. The cart was put before the horse. This led to a free fall of the currency, resulting in a 200per cent devaluation, and a surge in inflation and money supply. The outcome of the reforms and failure of the social intervention program is an Economic Reform Quagmire.

“It is therefore time for the government to hit the reset button, as it will take at least another budget cycle to achieve economic stability.

“Nigeria has to permanently resolve its vulnerability to oil price fluctuations. It must emulate other oil-producing nations like Norway, with a US$ 1.6 trillion sovereign wealth fund. last year, the Norwegian fund delivered US$213 billion in profits.

In our Nigeria 2024 year-end economic review, we stated that: “Q2 GDP growth at 3.19per cent is marginal with the July headline inflation easing from 34.19per cent to 33.40per cent. The trajectory of growth and inflation (not yet optimal) but in the desired direction allays the fears of recession and affirms the orthodox monetary policy stance of the CBN.

“This is amidst the background of a 75 per cent yearly increase in money supply to a record =N=100tn. Nigeria’s fiscal situation improved with revenue to debt service reduction by 30 per cent, with technology deployments improved revenue collection. However, the total debt burden of N121 trilliion remains a challenge, as the 2024 budget debt service of =N=8.27trillion exceeds both recurrent and capital expenditure. The supplementary budget will also increase the deficit from =N=10.4tn to =N=19.4tn.”

“Since then, the downward inflation trajectory has reversed, due to the recent month-on-month spike to 32.70 per cent from 32.25per cent, as a result of an increase in fuel prices. This will undoubtedly signal MPC for a further rate increase at the November meeting. Data evidence also suggests that the CBN will not meet its inflation target of 24per cent by year end.

“In the light of these developments; fiscal challenges, suboptimal growth at three per cent, declining productivity, high unemployment and failure to address growth strategies to move the Nigerian economy out of stagflation to a path of sustainability, we are hereby reviewing our forward guidance.”

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