CBN says money supply jumped 13.77% in December 2021

The Central Bank of Nigeria (CBN) said the broad money supply (M3) in the Nigerian economy increased further to 13.77% in December 2021 from 10.10% in November 2021.

This was revealed in the Central Bank of Nigeria’s Communique No. 140 of the Monetary Policy Committee Meeting held on Monday 24th and Tuesday 25th January 2022.

Broad money (M3) refers to the amount of money in circulation in a given economy. It is considered the most comprehensive method of determining a country’s money supply, as it includes both narrow money and other assets that can be quickly turned into cash for the purchase of goods and services. services.

What the CBN says about money supply

The monetary theory of inflation states that inflation is caused by an increase in the money supply. Consequently, Nigeria experienced a rise in inflation during the review period. Headline inflation (year-on-year) fell from 15.40% in November to 15.63% in December 2021, after seven months of decline.

The CBN said, “Reviewing the evolution of the monetary aggregates, the Committee noted that the broad money supply (M3) increased further to reach 13.77% in December 2021, compared to 10.10% in November 2021.”

The CBN linked the increase in the money supply to a growth in assets, which is a fundamental element of the money supply.

The CBN said, “This surge was largely driven by Net Domestic Assets (NDA) growth of 15.58% in December 2021, compared to 9.40% in November 2021.”

“The strong growth in net domestic assets (NDA) was largely attributed to an increase in claims on the federal government and other sectors. The slowdown in the growth of net foreign assets (NFA) resulted from a decline in foreign assets of the banking system in favor of more national investments”, the CBN added

On the other hand, net foreign assets (NFA) decreased to 6.06% in December 2021, from 14.98% in November 2021.

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