Nigeria’s money supply (M²) experienced a slight decline in January 2026, falling 0.8 percent month-on-month to N123.4 trillion from N124.4 trillion in December 2025. This drop points to low liquidity in the country’s banking system, even as the Central Bank of Nigeria (CBN) reduced interest rates on its Open Market Operations (OMO). The rate fell by 2.2 percentage points to 17.2 percent at the end of January from 19.4 percent in December, reflecting the central bank’s attempt to stimulate lending.
Data from the CBN’s Money and Credit Statistics revealed that most components of M² declined during the period. Quasi money, which includes highly liquid non-cash assets, decreased by 1.2 percent to N81 trillion, while currency outside banks fell by 3.7 percent to N5.2 trillion. Conversely, demand deposits rose modestly by 1.14 percent to N37.12 trillion, offering a small counterbalance to the overall liquidity contraction.
The decline in M² was mirrored in net domestic credit, which shrank as both government and private sector borrowing fell. Credit to the federal government dipped slightly by 0.11 percent to N34.18 trillion, while private sector credit recorded a 0.79 percent decline to N75.2 trillion. This combined slowdown resulted in net domestic credit of N109.4 trillion, down 0.59 percent from N110.06 trillion in December 2025.
Analysts emphasize that the quality of debt utilization is critical for economic sustainability. While borrowing remains a key fiscal tool, the focus must be on channeling funds into productive investments that expand Nigeria’s economic base. Poorly allocated borrowing could heighten medium-term fiscal vulnerabilities, they warn, underscoring the need for strategic debt management.
Experts also call for governments at all levels to strengthen internal revenue mobilisation and leverage Nigeria’s comparative economic advantages. By focusing on growth-enhancing initiatives and avoiding excessive debt accumulation, the country can better navigate low liquidity challenges while supporting financial stability and long-term economic development.
source: vanguard