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Real Reason for the depreciation of the Nigerian Naira



Acoording to Nairametrics An increase in money supply is likely one of the factors fueling the recent currency depreciation between the naira and the dollar.

This is based on an examination of the central bank’s money supply data over the last decade, particularly since the apex bank began its policy of intervention in the public and private sectors.

The amount of money supply in the economy is at its highest level on record, estimated at N48.8 trillion, with currency in circulation exceeding N3 trillion for the eighth consecutive month. Demand deposits, or funds held by banks on behalf of customers, have also reached an all-time high of N17 trillion.

The amount of money in circulation has grown over time, owing largely to the CBN’s low-interest policy (implemented to stimulate economic growth), trillions of naira in CBN intervention funds, and CBN bailouts of federal and state governments through its Ways and Means powers. As a result, there is an excess of naira chasing dollars.


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