Money Supply Hits Record N109 Trillion in September
– Private Sector Credit Climbs to N75.84 Trillion
– Currency in Circulation Rises to N4.31 Trillion
In September 2024, banks’ credit to the government surged to an unprecedented N42 trillion, driven by an increasing money supply (M3), according to the Central Bank of Nigeria (CBN). This marks an 89.8% year-over-year jump from N22.13 trillion in September 2023, underscoring the government’s growing dependence on bank financing.
Monthly Spike in Government Borrowing
Commercial banks’ credit to the government rose significantly in September, increasing by 34.86% from N31.15 trillion in August. This uptick reflects a sustained pattern in government borrowing.
Impact of Rising Government Credit
Increased government borrowing suggests a heavier reliance on the financial sector, particularly domestic banks, to fund infrastructure projects, social programs, and budget gaps. This pattern contributes to the rising national debt and greater demand for government bonds, which banks purchase to finance these operations.
Record High for Money Supply
The money supply (M3) reached an all-time high of N109 trillion in September 2024, marking a 1.68% increase from N107.19 trillion in August and a year-over-year rise of 62.8% from N66.94 trillion in September 2023.
Crowding Out Effect
Growing government credit may trigger a “crowding out” effect, where banks prioritize lending to the government over providing loans to businesses and individuals. This shift could limit private-sector growth as businesses struggle to access financing.
Ongoing Growth in Private Sector Credit
Despite the government’s borrowing increase, private-sector credit also expanded, growing by 27.46% year-over-year to reach N75.84 trillion in September 2024, up from N59.50 trillion in September 2023. On a monthly basis, private sector credit rose by 1.48% from August 2024.
Currency Circulation on the Rise
The currency in circulation jumped 56.2% year-over-year to N4.31 trillion in September 2024, up from N2.76 trillion a year prior. Month-over-month, this figure rose by 4.1%, from N4.14 trillion in August.
Increase in Currency Outside Banks
Currency held outside banks climbed to N4.02 trillion in September 2024, marking a 66.8% increase from N2.41 trillion in September 2023. This growing amount of currency outside the banking system may signal shifting trends in public spending and saving habits, as well as changes in the monetary environment.
