Money supply hits new record, now N125trn as domestic

…Experts flag need for tighter oversight

By Chinwendu Obienyi

Nigeria’s broad money supply rose to a record N124.99 trillion ($78 billion) in April, underscoring persistent liquidity growth in Africa’s largest economy despite the central bank’s prolonged tightening campaign to tame inflation.

Data released by the central bank showed broad money supply, or M3, increased from N123.12 trillion in February, adding nearly N1.9 trillion within two months.

Although, Daily Sun gathered that the CBN did not publish monetary aggregates for March, creating a gap in the reporting sequence, the latest figures highlight the challenge facing the apex bank as it seeks to strike a balance between containing inflationary pressures and supporting economic activity.

M3 measures the total money available within the economy, including cash in circulation, demand deposits, savings deposits, time deposits and foreign-currency holdings.

On an annual basis, money supply expanded by 4.8 per cent from N119.22 trillion recorded in April 2025, reflecting continued monetary expansion even as borrowing costs remain elevated.

The increase was driven largely by growth in domestic assets. Net domestic assets climbed to N100.97 trillion in April from N97.55 trillion in February, offsetting a decline in net foreign assets, which fell to N24.01 trillion from N25.57 trillion during the same period.

Narrow money supply, or M2, also rose to N124.98 trillion from N123.11 trillion, indicating that liquidity growth was broad-based across the banking system.

The data come months after the CBN eased its benchmark interest rate for the first time in nearly two years. At its recent meeting, the Monetary Policy Committee (MPC) chose to leave the Monetary Policy Rate (MPR) to 26.5 per cent, while maintaining the Cash Reserve Ratio at 45 per cent for commercial banks and 16 per cent for merchant banks. The liquidity ratio was left unchanged at 30 per cent.

Although inflation has moderated from recent peaks, experts say the continued growth in money supply could complicate efforts to sustain price stability, particularly as fiscal spending gathers pace ahead of Nigeria’s next election cycle.

Head, Research at FSL Securities, Victor Chiazor, explained that the expansion in broad money supply suggests that liquidity conditions remain relatively accommodative despite the high-interest-rate environment.

“When liquidity growth outpaces productivity growth, there is always the risk of renewed inflationary pressures, especially in an economy where supply-side constraints remain significant.”

Victor added that rising domestic assets indicate continued credit creation and government-related financial activity within the banking system, factors that could sustain aggregate demand in the coming months.

For investors, the decline in net foreign assets may be a more significant signal. According to the Chief Executive Officer, Financial Derivatives Company (FDC), Bismarck Rewane, who spoke at a recent forum, weaker foreign asset positions can reflect pressures on external reserves, exchange-rate management or foreign capital flows.

“The reduction in net foreign assets is something that the CBN will watch closely because it has implications for external sector stability and investor confidence. At the same time, the increase in domestic liquidity means the central bank must remain vigilant to ensure that excess money growth does not undermine recent gains in inflation moderation”, Rewane explained.

He had warned that increased election-related spending, historically associated with higher liquidity injections into the economy, could add another layer of complexity for the monetary authorities.

While stronger liquidity can support lending, consumption and economic growth, it also risks fueling inflation if not matched by improvements in productivity and output.

That leaves the CBN facing a delicate policy trade-off as it seeks to consolidate disinflation gains while sustaining momentum in an economy recovering from years of currency volatility, high borrowing costs and persistent cost-of-living pressures.

For now, the latest monetary data suggest liquidity remains abundant in the financial system, even as the MPC maintain a cautious approach to interest rates and inflation management.