Nigeria’s Money Supply Hits N119 Trillion as CBN Pauses Rate Hikes Amid Liquidity Surge
Nigeria’s broad money supply (M3) surged to a record N119.11 trillion in April 2025, marking a 22.9% increase from the same period last year, according to data from the Central Bank of Nigeria (CBN). This sharp liquidity expansion comes despite the CBN’s continued tight monetary stance, which includes maintaining the Monetary Policy Rate (MPR) at 27.5% in May 2025. The rise in money supply has raised concerns about whether the current policy setup can manage inflation, which eased slightly to 23.71% in April.
The growth in M3 is largely attributed to a strong increase in Nigeria’s net foreign assets (NFA), which rose by 66.3% year-on-year to N47.76 trillion. This surge reflects improved foreign exchange inflows, likely from oil exports, diaspora remittances, and external funding. Ongoing FX market reforms and better dollar liquidity have further bolstered foreign reserves, making NFA a key driver of monetary expansion. Meanwhile, net domestic assets (NDA) increased at a slower rate, reflecting restrained domestic lending and government borrowing amid high interest rates.
Broad money components like M2 and M1 also posted significant growth, indicating increased liquidity in both savings and demand deposits. M2 rose by 22.8% year-on-year to N119.08 trillion, while M1, the most liquid form of money, jumped by 21.3% to N41.01 trillion. This suggests heightened consumer spending or a preference for liquid assets in an inflationary environment, potentially driven by seasonal spending or informal sector activity.
Despite a slight drop in headline, food, and core inflation, the MPC chose to hold its rates steady, signaling a cautious approach. Other key monetary tools, such as the Cash Reserve Ratio (CRR) and Liquidity Ratio, were also left unchanged. CBN Governor Olayemi Cardoso emphasized the need to assess the effects of previous policy tightening, though the committee maintained a hawkish outlook due to persistent inflationary risks.
With M3 and M2 expanding rapidly and transactional liquidity on the rise, Nigeria’s monetary authorities are navigating a delicate path. The current strategy appears to hinge on the belief that foreign liquidity will not immediately trigger inflation. However, any resurgence in inflationary pressures or a significant weakening of the naira could prompt the CBN to resume monetary tightening to stabilize the economy.
Source: Nairametric