Why Naira Keeps Falling Against the Dollar: Experts Explain

The increased Money Supply, also known as M2, according to financial expert Mr. Idakolo Gbolade, is the cause of the continued depreciation of the Naira.

The total amount of money and other liquid assets in an economy on the measurement date is referred to as the money supply.

The Central Bank of Nigeria, CBN, reported that the money supply totaled N50.5 trillion in just October.

The amount of money in circulation in the nation increased by N6.1 trillion just this year, reaching N44.4 trillion by the end of 2021. This occurs at a time when the majority of Nigerians are battling economic hardship, rising inflation, and insecurity.

In response to the development, Gbolade claimed that while an elevated M2 should have sparked economic prosperity, the opposite actually occurred.

He explained that in order to prevent soaring inflation, lower interest rates and productivity growth are anticipated to match an increased money supply. However, a constructive trend has been hampered by the federal government’s current monetary policy.

Gbolade continued by saying that in order to address Nigeria’s economic problems, the government must modify its monetary policy framework.

To prevent rising inflation, an increase in the money supply must be accompanied by an equal increase in productivity.

“The ongoing devaluation of the Naira and rising inflationary trends have been made possible by the constant expansion of the money supply.

“It is anticipated that an increase in money supply will result in lower interest rates, more investment, and higher consumer spending.

It is also anticipated to support increased production and raw material imports, which will result in more jobs.

However, none of these expectations have yet been fulfilled due to the government’s monetary policy framework.

It is past due for Nigeria’s economic policymakers to examine policy implementation critically in order to get the desired outcome.

He stated.