Money supply hits 3-month low on liquidity squeeze
Private sector credit rises
Nigeria’s broad money supply (M3) jumped 24 percent to an all-time high of N114.2 trillion in March 2025, defying the Central Bank of Nigeria (CBN)’s ongoing monetary tightening efforts aimed at reining in inflation.
The M3, which serves as the most comprehensive measure of money in circulation within an economy, includes not only the cash used in everyday transactions but also large-scale deposits and financial assets that influence lending, investment, and inflation.
Despite the CBN’s firm stance on monetary tightening, the latest data from the apex bank indicates a year-on-year increase of 23.9 percent, with the money supply rising sharply from N92.18 trillion in March 2024.
On a month-on-month basis, the figure climbed by 3.2 percent from N110.70 trillion recorded in February 2025.
In a bid to counteract inflationary pressures and stabilise exchange rate fluctuations, the CBN withdrew N1.7 trillion from the financial system through Open Market Operations (OMO) auctions in March 2025.
Analysts at Afrinvest Securities Limited noted that the move was part of broader efforts to reduce liquidity and cool rising consumer prices.
Despite these measures, bank credit to the government expanded significantly, increasing by 28.9 percent year-on-year to reach N25.85 trillion in March 2025, compared to N20.05 trillion in the same month last year. However, on a monthly basis, government borrowing from banks dropped by 4.6 percent from N27.11 trillion in February.
Meanwhile, credit to the private sector rose modestly by 6.8 percent year-on-year to N76.26 trillion in March 2025, up from N71.43 trillion in March 2024. Month-on-month, the increase was marginal, rising by just 0.01 percent from N76.25 trillion in February 2025.
Currency in circulation also rose substantially over the past year. The amount of currency circulating in the economy jumped by 29.5 percent year-on-year to N5.00 trillion in March 2025, up from N3.86 trillion a year earlier. However, there was a slight decline on a monthly basis, with the figure dipping from N5.03 trillion in February 2025.
Similarly, the volume of currency held outside the banking system climbed by 26.8 percent year-on-year to N4.59 trillion in March 2025, compared to N3.62 trillion in March 2024. Month-on-month, currency outside banks increased by 1.8 percent from N4.51 trillion in February.
Over the last five years, the CBN has aggressively raised its Monetary Policy Rate (MPR), the benchmark interest rate, from 11.50 percent in 2021 to 27.50 percent as of March 2025. Most of the increase occurred in the past year, during which the rate was hiked by an unprecedented 875 basis points as the apex bank intensified its fight against inflation.
The tight monetary stance has yielded some results. Inflation, which stood at 24.48 percent in January 2025, eased to 23.18 percent in February. However, the relief was short-lived, as inflation rose again to 24.23 percent in March, signaling persistent inflationary pressures despite the Central Bank’s continued efforts.
