Nigeria’s money supply hits record N114.2trn despite tight monetary policy

Nigeria’s broad money supply (M3) surged by 24 percent year-on-year to reach an unprecedented N114.2 trillion in March 2025, defying the Central Bank of Nigeria (CBN)’s ongoing efforts to curb inflation through a strict monetary policy regime.

The M3 measure, which offers the most extensive overview of money circulating within the economy, encompasses not only physical cash but also large deposits and other liquid financial instruments. These components play a critical role in shaping borrowing, investment patterns, and inflation dynamics.

According to newly released figures from the CBN, the money supply rose steeply from N92.18 trillion in March 2024. On a monthly basis, M3 also grew by 3.2 percent, up from N110.70 trillion in February 2025.

This expansion comes even as the apex bank continues to implement contractionary measures. In March, the CBN withdrew N1.7 trillion from the financial system via Open Market Operations (OMO) auctions, a tool aimed at draining excess liquidity and stabilising the naira.

Analysts at Afrinvest Securities Limited observed that this action was consistent with broader moves to tame inflation and ease pressure on the exchange rate. However, despite these interventions, money supply has continued to climb.

Government borrowing from the banking sector also saw substantial growth, increasing by 28.9 percent year-on-year to N25.85 trillion in March 2025, up from N20.05 trillion in the same period last year. However, there was a notable 4.6 percent drop on a month-on-month basis from the N27.11 trillion recorded in February.

Private sector credit showed more modest growth. Lending to businesses and individuals grew by 6.8 percent year-on-year to N76.26 trillion, compared to N71.43 trillion in March 2024. The month-on-month change was marginal, rising by just 0.01 percent from N76.25 trillion in February.

Currency in circulation also posted a significant annual increase. The total amount of cash in the economy climbed 29.5 percent to N5.00 trillion in March 2025, up from N3.86 trillion the previous year. There was a slight monthly dip, however, with currency in circulation falling from N5.03 trillion in February.

Likewise, cash held outside the banking system rose markedly. It grew by 26.8 percent year-on-year to N4.59 trillion, up from N3.62 trillion in March 2024. Compared to the previous month, currency outside banks increased by 1.8 percent from N4.51 trillion.

These developments occurred in the context of the CBN’s aggressive interest rate hikes over the past five years. Since 2021, the Monetary Policy Rate (MPR) has jumped from 11.50 percent to 27.50 percent as of March 2025. Most of this increase took place in the last year alone, when the CBN raised the rate by a staggering 875 basis points in its most determined push yet to bring inflation under control.

There have been some signs of progress. Inflation, which stood at 24.48 percent in January 2025, eased to 23.18 percent in February. However, that relief proved temporary, as inflation ticked back up to 24.23 percent in March, indicating that upward price pressures remain entrenched despite the Bank’s determined stance.

With M3 at a record high and inflation still above target, the CBN faces a complex balancing act between tightening policy to control prices and ensuring that credit and liquidity remain sufficient to sustain economic growth.