Can Nigeria curb money supply growth?

Nigeria's broad Money Supply surged by 48.3 percent year-on-year to 107.7 trillion naira in October of the current year. Concurrently, credit to the government skyrocketed by 89.79 percent year-on-year to 42.02 trillion naira as of September. Femi Oladehin, Partner at Argentil Capital Partners, joined CNBC Africa to discuss the implications of these booming figures. Oladehin acknowledged the Central Bank's efforts to curb money supply growth through interest rate hikes and sterilizing bank deposits but voiced concerns about waning capacity in the face of persistent fiscal expansion. The economy's reliance on ways and means financing and the increasing dollarization further exacerbate the issue, resulting in soaring inflation rates. These trends indicate a continuation of the current trajectory, with money supply likely to remain on an upward spiral. The discussion then shifted to the government's borrowing plans and revenue generation projections for 2025. Oladehin painted a bleak outlook, foreseeing a 15 to 20 percent growth in money supply, amounting to an additional 20 to 25 trillion naira. The inevitable clash between fiscal budgeting, rising debt levels, and inflating economy spells further trouble for money supply dynamics. Reflecting on recent foreign exchange market fluctuations, particularly the naira's ephemeral appreciation, Oladehin cautioned against premature optimism. He likened the currency's short-lived uptick to a 'dead cat bounce,' underscoring the absence of fundamental shifts supporting a sustained revaluation. With inflation differentials remaining stark between Nigeria and the U.S., Oladehin warned of potential further devaluation if inflationary pressures persist. The dialogue hinted at the urgent need to address inflation and stabilize the exchange rate to avert further economic turmoil. While Oladehin refrained from providing specific inflation forecasts, the overarching theme underscored the critical importance of upcoming data releases and policy decisions. The impending Monetary Policy Committee meeting in January looms large as stakeholders brace for pivotal economic developments. As Nigeria grapples with mounting money supply growth amidst inflationary concerns, navigating these tumultuous waters demands astute fiscal and monetary policy interventions.