Nigeria Money Supply Expands 10.97% Amid Surging Inflation

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CBN InfraCorp

The broadest money supply, M3, increased by 10.97 percent in December 2020 relative to December 2019 and is well above the 6.84 percent provisional benchmark for 2020.

Nigeria money supply has continued to expand amid a persistent rise in inflation. After seventeen consecutive months of uptick, year-on-year headline inflation stood at 16.47 per cent in January 2021.

The expansion in M3 was as a result of the rise in both the Net Foreign Assets (NFA) and Net Domestic Assets (NDA).

Domestic credit expanded by 13.4 percent in December 2020, while credit to core private sector grew by 15.35 percent in December 2020 chiefly reflecting the effect of the various Central Bank of Nigeria (CBN’s) credit policies as well as the on-going development finance interventions.

For instance, between November 2020 and January 2021, a total of N499.01 billion was disbursed under the 15 interventions, including AGSMEIS, TCF, ABP, Manufacturing Sector Stimulus, Electricity Market Stabilization Facility, CBN/BOI Facility, Export Development Facility.

These policies have significantly affected interest rate developments with available data showing that Prime Lending and Maximum Lending rates have declined between October 2020 and January 2021.

In addition, about 62.7 percent of the N8.421 trillion lent by the banking system as at December 2020 was lent at less than 10 percent rate of interest per annum.

As at December 2020, 92.32 percent of the total amount lent by the banking system was at less than 20 percent interest rate, data from the CBN shows.

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