Money Supply Dropped to N110.3tn in February – CBN

The Central Bank of Nigeria (CBN) has reported a decline in the country’s money supply, which fell to N110.3 trillion in February 2024. This marks a reduction from previous months, reflecting the impact of recent monetary policies aimed at stabilizing the economy and curbing inflationary pressures.

The drop in money supply follows the CBN’s tightened monetary measures, including increased interest rates and liquidity control strategies. These policies were implemented to manage inflation, strengthen the naira, and ensure economic stability amid fluctuating forex reserves and rising consumer prices.

Impact of the Decline in Money Supply

A contraction in money supply generally leads to reduced liquidity in the financial system, affecting borrowing, investment, and overall economic activity. For businesses, this could mean higher lending rates, making it more expensive to access credit for expansion. Similarly, consumers may experience a slowdown in spending due to limited cash availability and higher borrowing costs.

However, economists argue that reducing money supply is necessary to control inflation, which has been a major concern in Nigeria. Excess liquidity in the system often fuels inflation by driving up demand for goods and services, leading to price increases. By tightening money supply, the CBN aims to stabilize prices and protect the purchasing power of Nigerians.

Policy Measures and Economic Outlook

The CBN has been actively adjusting its monetary policies to address economic challenges, including inflationary pressures, exchange rate volatility, and declining foreign reserves. The recent decline in money supply suggests that these measures are having an effect, though their long-term impact on economic growth remains to be seen.

Market analysts predict that the coming months will be crucial in determining whether the reduced money supply will lead to sustainable economic stability or if further policy adjustments will be needed. The government’s ability to balance liquidity control with economic growth will play a critical role in shaping Nigeria’s financial landscape in 2024.

While businesses and consumers may feel the immediate effects of reduced liquidity, the CBN remains focused on its broader objective of achieving economic stability. Moving forward, stakeholders will be watching closely to see if the current monetary policies can effectively curb inflation without stalling economic growth.