In September 2024, Nigeria’s money supply hit an unprecedented N109 trillion, reflecting a 1.68 percent increase from N107.19 trillion in August 2024. This represents a staggering year-on-year growth of 62.8 percent compared to N66.94 trillion in September 2023. Concurrently, credit to the private sector climbed to N75.84 trillion, marking a 27.46 percent year-on-year increase from N59.50 trillion.
Notably, banks’ credit to the government soared to N42 trillion, up 89.8 percent from N22.13 trillion in September 2023. This increase underscores the government’s growing reliance on bank financing amid escalating money supply levels. Monthly, the credit to the government rose sharply by 34.86 percent from N31.15 trillion in August, indicating a rising trend in government borrowing.
Implications of Increased Government Borrowing
The rising levels of government credit signal a heightened dependency on financial sector resources for various initiatives, including infrastructure projects and budget deficit financing. As the government borrows more, it often resorts to issuing bonds, which banks and financial institutions increasingly purchase, further inflating the national debt.
However, this trend raises concerns about the potential crowding out effect. As banks allocate more resources to government lending, the availability of credit for businesses and individuals may diminish. This shift could stifle growth in the private sector, making it harder for companies to secure necessary financing.
Currency Dynamics and Public Spending Habits
In addition to rising credit levels, currency in circulation reached N4.31 trillion, representing a 56.2 percent year-on-year increase from N2.76 trillion in September 2023, and a monthly rise of 4.1 percent from N4.14 trillion. Furthermore, currency held outside banks surged to N4.02 trillion, up 66.8 percent from N2.41 trillion in the previous year. This trend suggests significant shifts in public spending and saving habits, with more currency flowing outside the banking system.
As Nigeria navigates these dynamics, the interplay between government borrowing, private sector credit, and currency circulation will play a critical role in shaping the country’s economic landscape.