Nigeria’s broad money supply (M3) experienced a second monthly decline in 2025, falling by N292.75 billion or 0.25% to N119.01 trillion in May, according to new figures from the Central Bank of Nigeria (CBN). This follows an earlier drop in February and suggests that recent efforts by the CBN to tighten monetary policy are beginning to impact liquidity levels. Despite the contraction, total money supply remains historically high.
The latest data reveals notable shifts in the liquidity composition of the economy. Net foreign assets dropped significantly by N4.05 trillion (8.1%) from April to May, while net domestic assets rose by N3.76 trillion (5.4%). This adjustment implies pressure on Nigeria’s external reserves and possible reduction in foreign inflows, partially balanced by increased domestic liquidity.
The intermediate money supply measure, M2, mirrored the decline, dipping slightly by 0.24% to N118.99 trillion. Narrow money (M1), the most liquid form, also contracted by 1.5%, dropping to N40.38 trillion. These figures reflect tightening credit conditions and a drop in circulating cash and demand deposits.
However, year-on-year comparisons present a contrasting picture. Broad money supply surged by N19.77 trillion (19.9%) between May 2024 and May 2025, and M1 increased by 20.9% over the same period. This long-term growth was primarily driven by a dramatic 198% rise in net foreign assets, fueled by stronger oil revenues, Eurobond inflows, and diaspora remittances.
Despite the year-on-year expansion, the May figures indicate that the CBN’s restrictive policies are starting to restrain liquidity. Declines in M1 and M2 suggest that high interest rates and open market operations are slowing cash movement in the financial system. Future money supply trends will depend on the balance the CBN maintains between monetary tightening, fiscal pressures, and exchange rate volatility.
Source: Punch