Nigeria’s broad money supply (M3) expanded significantly to N129.21 trillion in May 2026, highlighting continued liquidity growth in the economy even as the Central Bank of Nigeria (CBN) sustains its aggressive tight monetary stance to combat inflation.
The latest CBN data shows a 3.38% month-on-month increase from N124.99 trillion in April, and a healthy year-on-year expansion from N119.20 trillion in May 2025. This growth suggests that despite high interest rates, money continues to circulate more freely within the banking system.
Key Drivers Behind the Expansion
The rise in broad money was underpinned by notable increases in both foreign and domestic asset positions:
– Net foreign assets jumped to N26.95 trillion from N24.01 trillion.
– Net domestic assets rose to N102.26 trillion.
– Quasi-money (savings and time deposits) grew to N84.58 trillion.
These developments point to stronger foreign inflows and continued domestic credit creation, even under restrictive monetary conditions.
Policy vs Reality Tension
The liquidity expansion comes shortly after the CBN’s Monetary Policy Committee (MPC) unanimously decided to hold the Monetary Policy Rate at 26.50% during its May meeting. The apex bank has repeatedly emphasised the need to anchor inflation and preserve macroeconomic stability.
However, the persistent growth in monetary aggregates raises questions about the effectiveness of current policy tools in fully sterilising excess liquidity. Analysts suggest that while the high interest rate environment is intended to slow price pressures, other factors such as improved oil revenues, foreign portfolio inflows, and domestic financial deepening are counteracting some of these efforts.
Implications for the Economy
For businesses and investors, the rising money supply could signal easier access to credit in certain segments, potentially supporting economic activity and investment. However, if not carefully managed, sustained liquidity growth may complicate the fight against inflation and put renewed pressure on the naira.
The CBN will likely continue monitoring these trends closely in the coming months. The balance between maintaining tight monetary conditions and allowing sufficient liquidity for growth remains one of the biggest challenges facing Nigeria’s economic managers in 2026.
As the economy navigates this delicate phase, the trajectory of broad money supply will serve as a critical barometer for assessing the effectiveness of current policies and the overall health of the financial system.
