Money Supply Plummets to N110.3tn in February, CBN Reports – Intl. Ed.

In 2025, Nigeria experienced its first reduction in money supply, dropping to N110.32 trillion in February from N110.94 trillion in January, according to data released by the Central Bank of Nigeria.

A 0.56 percent decrease from the previous month occurs as the central bank continues to work on managing liquidity within the financial system, following early indications of tighter monetary policies and adjustments in foreign exchange measures.

Even with a slight deceleration, the figure still stands considerably higher than it did during the equivalent time frame from the previous year. As of February 2024, the money supply was recorded at N95.56 trillion, reflecting a yearly growth rate of 15.45 percent.

The growth in M3 money supply, encompassing both net foreign assets and net domestic assets, offers a more comprehensive perspective on the nation's monetary activities.

The minor shrinkage in February mirrors changes in both foreign reserves and domestic credit.

Upon examining the fundamental elements more closely, it becomes evident that net foreign assets decreased by 8.62 percent to ₦32.34 trillion in February, declining from ₦35.39 trillion in the prior month.

This represents a reduction of over N3tn and may be linked to lower external reserves or increased foreign exchange interventions by the central bank aimed at stabilising the naira.

On the contrary, net domestic assets increased to ₦77.97 trillion in February from ₦75.55 trillion in January, representing a growth of 3.21 percent, indicating ongoing credit expansion within the national economy.

Year-on-year, net foreign assets rose sharply from N7.41tn recorded in February 2024, representing a growth of over 337 per cent. The surge reflects the impact of exchange rate reforms and increased foreign inflows.

In the meantime, net domestic assets decreased marginally from N88.15 trillion during the same timeframe, potentially indicating a shift within the financial sector prompted by adjustments in policy orientation.

Broad money supply, captured under M2, also witnessed a slight decline in February, dropping to N110.31tn from N110.93tn in January.

The 0.56 per cent fall mirrors the trend observed in M3. However, on a yearly basis, M2 rose by 17.39 per cent, up from N93.97tn in February last year. The data highlights a broader expansion in money supply over the past 12 months, consistent with increased government spending and other fiscal measures.

On the contrary, the narrow money supply, encompassing circulating currency and demand deposits, saw an uptick in February. This amount increased to N37.57 trillion from N36.77 trillion in January, reflecting a rise of 2.18 percent.

Compared to February 2024, when narrow money stood at N30.28tn, this translates to a growth rate of 24.07 per cent. The increase may be attributed to higher transactional demand for cash and short-term liquidity needs amid ongoing inflationary pressures and currency volatility.

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

The sharp rise in foreign assets observed over the past year now appears to be levelling off, possibly due to stabilising inflows or the effects of the CBN’s activities in the foreign exchange market.

Given that inflation remains high but the naira indicates stability, the modest decrease in the money supply for February might provide an opportunity for the CBN to adjust its policy instruments more precisely.

The most recent statistics are anticipated to influence discussions at the upcoming Monetary Policy Committee gathering, as the central bank strives to maintain a fine line between curbing inflation and fostering economic expansion.

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