money supply

Remember when your mother would come back from the market at Mile 12 and say the money in her purse just was not doing what it used to do, that the same ₦5,000 that filled two bags last year now barely filled one. She was not imagining it. She was feeling, in her own pocket, what economists mean when they talk about money supply.

Money supply is simply the total stock of money moving around in a country at any given time. It is more than the cash in wallets and under mattresses. It includes money sitting in current accounts, savings accounts, and anything people can spend or withdraw quickly. The Central Bank of Nigeria watches this number closely because it tells a story about how much fuel is in the economic engine.

Here is the part that surprises people. Money is not printed and dropped from the sky whenever the government feels generous. Most of it is created through banks lending. When GTBank gives a small business owner in Onitsha a ₦2,000,000 loan to restock her shop, that loan becomes new money circulating in the economy, because she will spend it, and whoever receives it will spend some too. Multiply that across thousands of loans and you start to see how the supply of money grows or shrinks.

This matters because too much money chasing too few goods pushes prices up, which is one reason Nigerians have watched garri and fuel prices climb even when nothing about garri or fuel actually changed. In the United Kingdom, the Bank of England pays close attention to this too, adjusting interest rates partly to control how freely banks lend and how fast money supply grows.

For someone sending money home from London to Lagos, this connects directly to daily life. If money supply in Nigeria is growing faster than the goods and services available, the ₦ your family receives buys less by the time they spend it, even though the figure on the transfer receipt looks generous.