Naira supply dropped to N110.3trn in February — CBN
Nigeria’s money supply experienced its first decline in 2025, dropping to N110.32tn in February from N110.94tn in January, according to data from the Central Bank of Nigeria (CBN).
The 0.56 per cent month-on-month decrease comes amid the apex bank’s ongoing efforts to regulate liquidity within the financial system, following earlier indications of monetary tightening and foreign exchange adjustments.
Despite this modest contraction, the overall figure remains substantially higher than the same period last year. In February 2024, the money supply stood at N95.56tn, reflecting a year-on-year increase of 15.45 per cent.
The expansion in M3 money supply, which comprises both net foreign assets and net domestic assets, provides a broader perspective on the country’s monetary landscape.
The slight decline in February mirrors shifts in both foreign reserves and domestic credit.
A deeper analysis of the underlying components reveals that net foreign assets contracted by 8.62 per cent, falling to N32.34tn in February from N35.39tn the previous month.
This represents a reduction exceeding N3tn and may be attributed to a decline in external reserves or increased foreign exchange interventions by the central bank aimed at stabilising the naira.
Meanwhile, net domestic assets saw a marginal decrease from N88.15tn over the same period, possibly reflecting a reallocation within the financial sector in response to evolving policy directions.
Broad money supply, categorised under M2, also recorded a slight dip in February, decreasing to N110.31tn from N110.93tn in January.
The 0.56 per cent decline is consistent with the trend observed in M3. However, on an annual basis, M2 rose by 17.39 per cent, up from N93.97tn in February 2024. This data underscores a broader expansion in the money supply over the past year, aligning with increased government expenditure and other fiscal policies.
Conversely, the narrow money supply, which encompasses currency in circulation and demand deposits, increased in February. The figure climbed to N37.57tn from N36.77tn in January, reflecting a 2.18 per cent rise.
Compared to February 2024, when narrow money stood at N30.28tn, this marks a 24.07 per cent growth rate. The increase may be linked to heightened transactional demand for cash and short-term liquidity needs amid persistent inflationary pressures and currency fluctuations.
The decline in overall money supply, despite the rise in narrow money and net domestic assets, suggests a shift in liquidity distribution. The contraction in net foreign assets appears to have had a significant impact on M3, even as domestic credit conditions remain steady.
The sharp increase in foreign assets observed over the past year now seems to be stabilising, possibly due to steadying capital inflows or the effects of the CBN’s interventions in the foreign exchange market.
With inflation still elevated and the naira exhibiting signs of stability, February’s slight reduction in money supply could provide the CBN with some flexibility in adjusting its monetary policy instruments.
The latest figures are expected to inform discussions at the next Monetary Policy Committee meeting as the apex bank continues to navigate the delicate balance between inflation control and economic growth.
