Nigeria’s Money Supply Declines to N110.3tn in February Amid CBN’s Liquidity Management

Nigeria’s money supply experienced its first decline of 2025, dropping to N110.32 trillion in February, down from N110.94 trillion in January, according to data from the Central Bank of Nigeria (CBN).

The 0.56% month-on-month decline reflects the apex bank’s ongoing efforts to manage liquidity, amid monetary tightening and foreign exchange adjustments aimed at stabilizing the financial system.

Money Supply Trends and Market Dynamics

Despite this slight contraction, money supply remains significantly higher on a year-on-year basis, having risen 15.45% from N95.56 trillion recorded in February 2024.

The shift in M3 money supply, which includes net foreign assets (NFA) and net domestic assets (NDA), indicates key changes in Nigeria’s financial landscape:

• Net Foreign Assets (NFA): Declined by 8.62% to N32.34 trillion in February from N35.39 trillion in January. The N3 trillion drop is likely linked to reduced external reserves or increased foreign exchange interventions by the CBN to support the naira.
• Net Domestic Assets (NDA): Increased by 3.21% to N77.97 trillion, up from N75.55 trillion in January, signaling continued credit expansion in the domestic economy.

On a yearly basis, net foreign assets surged by over 337%, rising from N7.41 trillion in February 2024—a reflection of exchange rate reforms and stronger foreign inflows. However, net domestic assets declined from N88.15 trillion over the same period, suggesting a reallocation of liquidity within the financial sector.

Broad Money and Narrow Money Trends

• Broad money supply (M2) also declined slightly to N110.31 trillion in February from N110.93 trillion in January, mirroring the trend in M3. However, M2 increased by 17.39% year-on-year, up from N93.97 trillion in February 2024, highlighting broader monetary expansion driven by fiscal policies.
• Narrow money supply (M1), which includes currency in circulation and demand deposits, rose by 2.18% in February to N37.57 trillion, up from N36.77 trillion in January. Compared to N30.28 trillion in February 2024, this represents a 24.07% annual increase, likely due to higher demand for cash amid inflationary pressures and short-term liquidity needs.

Implications for Monetary Policy

The decline in overall money supply, despite the increase in narrow money and domestic credit, suggests a structural shift in liquidity. The drop in net foreign assets appears to have weighed heavily on M3, even as domestic credit conditions remain relatively stable.

The CBN’s recent efforts in the foreign exchange market seem to be moderating the sharp rise in foreign assets observed over the past year. With inflation still elevated and the naira showing signs of stability, the slight contraction in February’s money supply could provide room for policy adjustments.

As the CBN’s Monetary Policy Committee (MPC) prepares for its next meeting, these latest figures will play a crucial role in shaping policy decisions, balancing inflation control with economic growth strategies.