Money supply weak to drive growth momentum – MPC members

Godwin Emefiele

Nigeria’s money supply was seen to be constraining the growth momentum in the economy as Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), says the current performance of monetary aggregates have been unsatisfactory.

According to Emefiele, both the broad and narrow money aggregates, M2 and M1 performed below their benchmark in February 2019. Specifically, M2 contracted by 1.98 percent over the preceding December 2018, and about 14.47 percentage points below the 2019 growth benchmark of 12.99 percent.

Similarly, M1 declined by 6.16 percent compared with the provisional growth benchmark of 17.08 percent. Credit to private sector grew by 6.41 percent, year-to-date, compared to the provisional benchmark of 9.41 percent. Similarly, aggregate credit to the domestic economy grew by 10.64 percent as against its provisional benchmark of 11.82 percent.

Other members of the Monetary Policy Committee (MPC) also corroborated with the CBN governor on this. Isa-Dutse, Mahmoud, MPC member said, “It is noteworthy that most of the key monetary aggregates underperformed relative to the provisional benchmarks.”

In February 2019, M3 grew by 4.31 percent – well below the benchmark of 14.47 percent, while M2 and Net Foreign Assets (NFA) contracted by 1.98 percent and 7.47 percent relative to benchmark figures of 12.99 percent and 18.66 percent, respectively. These statistics indicate that monetary policy has been quite restrictive and that money supply may be constraining the growth momentum in the economy. Thus, there is a need to review the current monetary policy stance to promote growth.

In his personal statement, Obadan, Mike Idiah, another MPC member, said developments in monetary aggregates suggest scope to expand money supply to drive economic growth. Broad money supply (M2) declined by 1.98 percent in February 2019 below the level at end-December, 2018. The annualized growth of M2 stood at -11.91 percent compared to the 2019 provisional benchmark of 12.99 percent.

On the other hand, annualized growth of broad money aggregate (M3) at 25.88 percent was, however, above the 2019 provisional benchmark of 14.47 percent.

Although M3 grew largely because of increase in CBN bills, the M2 component contracted in January and February 2019, respectively, reflecting tight monetary policy stance of the Bank. “Overall, money supply still remains weak to drive the growth momentum in the economy,” he said.

TAGGED:CBN Godwin Emefiele

Share This Article

ByHope Moses-Ashike

Follow:

Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.