CBN Tightens Grip as Nigeria’s Money Supply Contracts for First Time in 2025
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Nigeria’s money supply has recorded its first contraction of the year, falling from ₦110.94tn in January to ₦110.32tn in February, according to the latest figures from the Central Bank of Nigeria (CBN). The 0.56% decline signals ongoing efforts by the apex bank to manage liquidity in response to inflationary pressures and exchange rate volatility.
While the monthly drop may seem marginal, year-on-year figures paint a different picture—money supply remains significantly higher than in February 2024, when it stood at ₦95.56tn, reflecting a 15.45% increase over the past year. The broad money supply (M3), which includes both net foreign assets and net domestic assets, provides a clearer indication of shifts in Nigeria’s financial landscape.
A breakdown of the data shows that net foreign assets fell sharply by 8.62% in February, dropping from ₦35.39tn to ₦32.34tn. Analysts suggest this decline may be linked to increased interventions by the CBN in the foreign exchange market as part of efforts to stabilise the naira.
Conversely, net domestic assets rose by 3.21% in the same period, climbing from ₦75.55tn to ₦77.97tn—indicating that credit expansion within the domestic economy remains strong. However, the year-on-year comparison tells a more complex story. While net foreign assets have surged by over 337% since February 2024, rising from ₦7.41tn, net domestic assets have dipped slightly from ₦88.15tn, suggesting shifts in lending patterns and financial system dynamics.
Narrow money supply (M1), which tracks cash in circulation and demand deposits, increased by 2.18% in February, reaching ₦37.57tn from ₦36.77tn in January. Compared to the same period last year, this represents a 24.07% jump, likely driven by rising demand for cash amid inflationary pressures.
The broader contraction in overall money supply despite the increase in narrow money suggests a shift in liquidity distribution, with CBN’s interventions in the forex market playing a significant role. The decline in net foreign assets has weighed on the overall supply of money, even as domestic credit conditions remain robust.
The latest figures will likely shape discussions at the next Monetary Policy Committee meeting, where the CBN faces the delicate task of balancing inflation control with economic growth. With the naira showing signs of stabilisation but inflation still running high, the central bank’s next move will be closely watched by businesses and consumers alike.
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