Nigeria’s broad money supply (M3) rose to N114.22 trillion in March 2025, up by 24% year-on-year from N92.19 trillion in the same month of 2024, according to the latest data from the Central Bank of Nigeria (CBN).
The surge in money supply comes amid rising inflationary pressures, with headline inflation climbing to 24.23% in March.
On a month-on-month basis, M3 rose by 3.2% from N110.71 trillion in February. This was largely driven by a sharp increase in net foreign assets (NFA), which jumped by 38.9% to N45.17 trillion, signalling stronger capital inflows and improved external liquidity.
Meanwhile, net domestic assets (NDA) declined by 11.7% to N69.05 trillion, suggesting tighter liquidity on the domestic front.
Foreign assets up, domestic liquidity tightens
- In Q1 2025, M3 grew from N111.11 trillion in January to N114.22 trillion in March, representing a 2.8% quarterly increase. Net foreign assets rose significantly during the period, from N33.19 trillion to N45.17 trillion—an N11.98 trillion gain—likely reflecting improved foreign exchange inflows and stronger balance of payments support.
- In contrast, net domestic assets fell from N77.92 trillion to N69.05 trillion, down 11.4%, pointing to possible liquidity tightening by the CBN through open market operations or reduced government borrowing.
- The trend suggests that Nigeria’s liquidity expansion in Q1 was driven more by foreign inflows than domestic credit growth, a shift that has implications for inflation and interest rate policy.
M2 and narrow money maintain an uptrend
- M2 money supply—which excludes institutional investments but includes savings and time deposits—rose to N114.20 trillion in March, mirroring M3’s performance. This marks a 24.2% increase compared to N91.95 trillion in March 2024.
- Narrow money (M1), which includes physical currency and demand deposits, also grew to N38.55 trillion, up 19.7% year-on-year and 2.2% month-on-month. This continued rise in M1 signals strong transactional demand and possibly increased liquidity in consumer-facing sectors.
What you should know
The surge in money supply coincided with a spike in inflation. Data from the National Bureau of Statistics (NBS) shows that headline inflation rose to 24.23% in March, up from 23.18% in February. This represents a 1.05 percentage point increase year-on-year.
- On a month-on-month basis, inflation rose by 3.90% in March, sharply up from 2.04% recorded in February. The faster pace of price increases suggests stronger demand-side pressures and rising input costs, especially in food, transport, and energy.
- Despite the CBN’s implementation of a historically high Cash Reserve Ratio (CRR) of 50%—the highest globally—Nigeria’s broad money supply still maintained its growth.
- The CRR mandates that commercial banks hold a specified percentage of their deposits with the CBN, effectively reducing the amount available for lending and investment.
- By setting the CRR at 50%, the CBN intended to withdraw substantial liquidity from the banking system to mitigate inflationary pressures.
- However, the continued rise in M3 suggests that other factors are contributing to the expansion of the money supply.
- With inflation accelerating and liquidity expanding, pressure is mounting on the CBN to respond. The next Monetary Policy Committee (MPC) meeting is scheduled for May 19–20, 2025, and it is likely that the CBN may raise rates after holding them steady in February.
A rate hike would be aimed at reining in inflation by curbing excess liquidity and managing demand. However, tightening too aggressively could slow economic recovery and increase the cost of borrowing for businesses and households.
The CBN faces a delicate balancing act. Broad money supply is rising on the back of stronger foreign inflows, but inflation is moving faster than expected. While growing NFA may support naira stability, the declining domestic asset base and higher consumer prices will likely dominate policy discussions at the upcoming MPC meeting.