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- Nigeria’s money supply rose to N110.98 trillion in January
- Money supply maintained an upward trend throughout 2024
- Data on liquidity level is crucial to the monetary policy decisions of the Central Bank of Nigeria
Nigeria’s broad money supply (M3), which measures the total amount of money in an economy, increased to N110.98 trillion in January 2025, a 17.3 per cent year-on-year increase from N94.61 trillion recorded in January 2024.
According to the latest credit and monetary statistics released by the Central Bank of Nigeria (CBN), the increase was driven by net foreign assets and net domestic assets.
The CBN’s data however did not provide figures for December 2024.
The data shows that net foreign assets increased by 19 per cent from N29.73 trillion in January 2024 to N35.39 trillion in January 2025.
Net domestic assets increased by 16.5 per cent year-on-year to N75.59 trillion from N64.87 trillion recorded in January 2024.
The increase in the net foreign asset is likely due to improved external reserves, capital inflows, and a stronger trade balance.
On the other hand, the increase in the net domestic assets is likely due to increased lending, government borrowing, and broader credit expansion.
Money supply growth trend in 2024
Nigeria’s money supply has seen a steady increase over the past year, especially in the second half of 2024.
Money supply reached an all-time high of N106.27 trillion in July 2024, up from the N101.34 trillion recorded in June 2024.
It increased to N107.19 trillion in August 2024 and further rose to N108.97 trillion in September 2024. As of November 2024, M3 stood at N109.41 trillion before reaching N110.98 trillion in January 2025.
Implication for MPC decision
The increase in money supply in liquidity levels in the economy is crucial for determining the Monetary Policy Rate (MPR) by the Monetary Policy Committee (MPC).
An increase in money supply is known to drive inflationary pressures, as excess liquidity can drive up consumer demand, leading to price hikes.
The Olayemi Cardoso-led Central Bank of Nigeria (CBN) adopted an MPR hike to address excess liquidity and control inflation, resulting in the six-time hike of interest rate in 2024.
The rate was increased from 18.75 per cent in January 2024 to 27.50 per cent in November, representing an 8.75 per cent increase within the year.
However, heightened inflation persisted throughout 2024, reaching 34.80 per cent in December 2024 before dropping to 24.48 per cent in January 2025, following the rebasing of the Consumer Price Index by the National Bureau of Statistics (NBS).
As the MPC prepares to announce the decision of its 299th meeting, the increase in money supply will play a key role in the direction the committee will swing, as it will need to weigh the risks of monetary expansion against the need for economic stability.
If the MPC decides to raise the MPR, it could help curb inflation by tightening liquidity, but it may also slow credit growth and dampen economic activity.
On the other hand, if the committee votes to maintain current the rate, it could sustain the growth momentum but may exacerbate inflationary pressures and further weaken the naira.
CBN says Nigerians withdrew N365.38 billion in November 2024
Meanwhile, TheRadar earlier reported that the Central Bank of Nigeria (CBN) said Nigerians withdrew N364.38 billion from banks in November 2024 amid the cash scarcity witnessed in many parts of the country.
This was according to the latest data from the Money and Credit Statistics of the CBN, which also stated that currency outside banks increased to N4.65 trillion from N4.29 trillion in October, representing an 8.5 per cent month-on-month increase.
