The Central Bank of Nigeria (CBN) may be gearing up to raise interest rates in May, as inflationary pressures continue to mount and money supply balloons. New data from the CBN shows that Nigeria’s broad money supply (M3) climbed to N114.22 trillion in March 2025—a staggering 24% jump from the previous year. This rise comes despite the bank’s aggressive 50% Cash Reserve Ratio (CRR), which has so far failed to rein in liquidity and inflation, now at 24.23%.
While the CRR was meant to restrict lending and mop up excess cash, the unexpected surge in net foreign assets (NFA)—which rose nearly 39% in just one month to N45.17 trillion—has kept liquidity levels high. Meanwhile, net domestic assets (NDA) fell by 11.7%, pointing to tighter credit conditions at home, possibly due to reduced government borrowing or active CBN interventions in the money market.
Between January and March 2025, the spike in money supply was almost entirely driven by a massive N11.98 trillion boost in foreign assets. This reflects stronger capital inflows and a more robust external reserve position. Narrow money (M1) and M2 both followed the same upward trend, with M1 reaching N38.55 trillion and M2 rising to N114.20 trillion, signaling higher consumer demand and transactional activity.
With inflation accelerating month-on-month—from 2.04% in February to 3.90% in March—analysts believe the CBN may have little choice but to raise its benchmark interest rate to curb inflation and stabilize the economy. The upcoming Monetary Policy Committee (MPC) meeting in May is now seen as a critical juncture, as the bank balances the risks of hurting economic recovery against the need to control spiraling prices.
Source: The sun