In a striking display of economic resilience, Nigeria’s demand deposits have skyrocketed by 206.83% from N9.67 trillion in May 2019 to N29.67 trillion in May 2024, according to recent data published by the Central Bank of Nigeria (CBN).
Key Highlights:
- Demand deposits grew by 9.31% between May 2019 and May 2020, reaching N10.57 trillion, despite global economic uncertainties caused by the COVID-19 pandemic.
- The growth trajectory continued, surpassing the N20 trillion mark in early 2023.
- Factors contributing to this substantial increase include increased economic activities, government stimulus measures, and enhanced liquidity in the banking system.
Expert Insights:
Shedrach Israel, an economist at Lotus Beta Analytics, commented on the significance of this growth: “The surge in demand deposits signifies robust consumer confidence and liquidity in Nigeria’s financial system. It reflects heightened economic activities, investments, and savings mobilisation within the country, supporting lending activities and stimulating economic growth.”
Olorunfemi Idris, an analyst at Phemmy Gracey Limited, highlighted the potential benefits and risks: “The increase in demand for deposits has important implications for the economy, providing banks with more funds to lend and potentially boosting credit availability and economic growth. However, it also raises concerns about inflation and the potential surge in money supply, which could lead to economic instability if not managed properly.”
Implications and Challenges:
- Monetary Policy: The rising trend in demand deposits presents new considerations for policymakers, requiring vigilant monitoring to ensure financial stability.
- Inflation Management: There’s a need to balance the positive effects of increased liquidity with potential inflationary pressures.
- Sustainable Growth: Experts emphasise the importance of careful management to mitigate potential risks and ensure sustainable economic development.
Conclusion:
While the dramatic increase in demand deposits reflects a resilient and growing financial sector in Nigeria, it also underscores the need for balanced economic policies. As the country navigates this period of financial growth, the focus remains on leveraging these positive trends while maintaining stability in the economy.