Nigeria’s broad money supply (M3) rose by 117.3% year-on-year to N110.98 trillion in January 2025 from N94.61 trillion in January 2024, according to the latest data from the Central Bank of Nigeria (CBN).
The surge in liquidity is attributed to a sharp rise in both net foreign assets and net domestic assets, signaling increased capital inflows, external reserves growth and expanded credit within the financial system.
Despite this increase, the CBN did not provide figures for December 2024, leaving a gap in assessing monetary movements during the peak holiday spending season.
Nigeria’s net foreign assets climbed to N35.39 trillion in January 2025, up 19% year-on-year from N29.73 trillion, while net domestic assets expanded by 16.5% to N75.59 trillion from N64.87 trillion recorded a year earlier.
The data comes as the Monetary Policy Committee (MPC) convenes this week to determine the next course of action on interest rates amid mounting inflationary concerns.
The rising money supply is expected to be a key point of discussion as policymakers evaluate measures to stabilize inflation and the naira.
With Nigeria’s headline inflation rate standing at 24.48% in January, analysts anticipate that the MPC may consider tightening monetary policy further to curb inflationary pressures.
Historically, an increase in money supply is linked to higher inflation as excess liquidity fuels consumer demand and price increases.
At its last meeting, the CBN raised the Monetary Policy Rate (MPR) by 25 basis points to 27.50%, marking the sixth consecutive rate hike in 2024.
However, with inflation appearing to moderate under the rebased CPI, some economic analysts and business groups have urged the CBN to halt further monetary tightening and instead focus on fiscal interventions.
“The Centre for the Promotion of Private Enterprise earlier urged the CBN to halt further monetary tightening, arguing that fiscal policy interventions should now take precedence in addressing inflationary pressures,” the report stated.
Despite the surge in money supply, demand for affordable credit remains a concern. Business leaders warn that continued rate hikes could limit access to capital for businesses and households.
As the MPC deliberates its next move, the CBN will need to balance liquidity management, inflation control and economic growth considerations while ensuring monetary stability in an evolving macroeconomic environment.
