Nigeria’s money supply contracted for the second time in 2025, dipping to N119.01 trillion in May from N119.30 trillion in April, a decline of N292.75 billion or 0.25%, according to the Central Bank of Nigeria (CBN). This follows a similar drop in February, signaling tighter monetary conditions as the CBN intensifies efforts to curb inflation and stabilize the economy.
Despite the monthly decline, the broad money supply (M3) has grown significantly year-on-year, rising 19.9% from N99.24 trillion in May 2024, driven by a surge in net foreign assets from N15.34 trillion to N45.81 trillion. This near-tripling of foreign assets reflects stronger oil revenues and external financing. However, a 12.8% drop in net domestic assets to N73.19 trillion suggests reduced domestic liquidity, likely due to the CBN’s high Monetary Policy Rate and aggressive open market operations.
Narrower measures also declined, with M2 falling to N118.99 trillion and M1 (cash and demand deposits) dropping 1.5% to N40.38 trillion, indicating reduced cash availability. While liquidity remains high compared to last year’s N33.38 trillion M1, these trends highlight the CBN’s balancing act between controlling inflation and supporting growth. Economists warn that sustained tightening could strain credit access, urging careful calibration to avoid stifling economic activity.
