Nigeria’s economic outlook is growing increasingly uncertain as the country experiences its first decline in money supply. The Central Bank of Nigeria (CBN) reported a drop of 0.56% in February 2025, bringing the money supply to N110.32 trillion, down from N110.94 trillion in January 2025. While this decrease indicates tighter liquidity control efforts, it highlights potential risks for the country’s economy, particularly as the government plans to maintain a large budgetary expenditure of N49.74 trillion for the year.
The decrease in money supply is primarily driven by an 8.62% drop in net foreign assets, which fell to N32.34 trillion, reflecting a possible reduction in external reserves and increased foreign exchange interventions by the CBN. Domestic assets also saw a slight dip, suggesting a reallocation within the financial system that could be linked to changing monetary policies. Credit to the private sector also continued to fall, with a decrease to N73.66 trillion in February, further compounding the challenges faced by businesses and the wider economy.
Financial analysts have expressed concerns that the contraction in money supply and private sector credit could limit access to funding, which would adversely affect business expansion, job creation, and investments in vital sectors like manufacturing, agriculture, and technology. Experts warn that prolonged credit tightness could stifle economic growth and lead to a slowdown in critical industries, undermining efforts to stimulate the economy.
David Adonri, Vice-Chairman of Highcap Securities Ltd, emphasized the potential challenges ahead for Nigeria, citing the rising fiscal strain as debt servicing consumed 147% of retained revenue in 2024. While inflation has shown signs of slowing, it remains high, and Adonri suggested that the federal government should focus on improving tax compliance to alleviate fiscal pressures. He praised the CBN’s recent monetary reforms but called for coordinated fiscal and monetary efforts to balance inflation control with the need for economic expansion.
Source: The sun