Based on 2021 GDP, Nigeria’s PSCE to GDP ratio is equivalent to c.24.0%. This compares with 38.3% for the broad group of sub-Saharan African peers according to data from the World Bank.

Although almost all the monetary aggregates showed similar growth rates with PSCE growth, credit growth to the government continued to outpace others, as it increased by 78% y/y.

Notably, broad money (M3) which is typically watched closely by the monetary policy committee (MPC) increased by 17.3% y/y, down from 21.6% y/y the previous month.

The MPC increased the policy rate by 500bps last year (and a further 100bps in Jan ’23).

However, the recent data on the monetary aggregates - particularly those on M3 and credit to government - indicate that as at end-Dec’22 the rate hikes were yet have the desired effect they should.

On a related note, the World Bank and International Monetary Fund have persisted in advising the CBN against using ways and means financing to cover the unfunded portion of the fiscal deficit.

The continued growth of monetary aggregates and the unabated rise in headline inflation, which increased to 21.8% y/y in January 23 from 21.3% y/y in Dec ‘22, suggest that the MPC may need to raise rates further over the next few MPC meetings.