The Central Bank of Nigeria has released data on money and credit, revealing that Money Supply (M3) reached N67.2 trillion in September 2023. This marks a significant increase of 36.2% compared to N49.3 trillion in September 2022. On a monthly basis, it rose by 2.3% from N65.7 trillion in August 2023. These figures indicate that monetary factors play a role in Nigeria’s high inflation rate. In September, net domestic assets accounted for approximately 99.1% of the money supply, while net foreign assets stood at N591 billion, which is less than 1%.
This suggests that controlling the growth of net domestic assets could help reduce the expansion of the money supply, ultimately aiding in the management of the inflation rate. Additionally, CBN data reveals that the currency in circulation is approaching the levels seen before the currency redesign, which were N2.88 trillion in 2021 and N3.24 trillion in 2022. As of September 2023, the currency in circulation amounted to around N2.76 trillion, showing an increase from N982.1 billion recorded in February. Following the court ruling in March, which allowed the simultaneous use of both old and new currency until the end of the year, the currency in circulation rose to N1.68 trillion.
With only two months remaining in the year, there has been no policy directive regarding the phasing out of the old currency. This is crucial to avoid the economic challenges faced during the initial two months of 2023. Therefore, it is imperative for the monetary authority to provide policy guidance in the coming months to slow down the growth of the money supply. This would serve as an initial step in addressing the inflation rate and considering the possibility of using the old notes in 2024. SOURCE: CSEA Africa