Market News

By Sami Tunji

Nigeria’s broad money supply (M3) rose to N110.98tn in January 2025, representing a 17.3 per cent year-on-year increase from N94.61tn recorded in January 2024.

The latest figures, sourced from the Central Bank of Nigeria’s monetary and credit statistics, highlight a growing liquidity trend in the economy, fuelled by a surge in both net foreign assets and net domestic assets.

Despite this increase, the CBN did not provide figures for December 2024, creating a gap in assessing monetary movements during the peak holiday spending season.

The release of these figures comes just as the Monetary Policy Committee convenes this week—on Wednesday, February 19, and Thursday, February 20—to decide on the country’s interest rates amid mounting inflationary concerns.

The surge in money supply will likely weigh on discussions as policymakers deliberate on measures to contain inflation and stabilise the naira.

Nigeria’s net foreign assets climbed to N35.39tn in January 2025, a 19 per cent YoY increase from N29.73tn recorded a year earlier.

The rise in foreign assets suggests improved external reserves, increased capital inflows, and a more favourable trade balance.

Similarly, net domestic assets grew by 16.5 per cent YoY, rising to N75.59tn from N64.87tn in January 2024.

This increase signals an expansion in government borrowing, private sector credit, and broader financial sector liquidity.

The growth in domestic assets further supports the upward trajectory of M3, which encompasses both net foreign assets and net domestic assets, providing a more comprehensive view of Nigeria’s monetary landscape.

Over the past year, Nigeria’s money supply has expanded steadily, with significant jumps in the latter half of 2024.

By November 2024, M3 stood at N108.97tn, and in September 2024, it reached N109.41tn before climbing to its latest peak in January 2025.

These increases indicate a rise in overall liquidity within the financial system. The MPC faces a crucial decision this week as it determines the next course of action regarding interest rates.

With money supply rising and inflation still a concern, the CBN may consider tightening monetary policy to curb inflationary pressures. Historically, an increase in money supply has been associated with higher inflation, as excess liquidity fuels consumer demand, leading to price hikes.

Nigeria’s headline inflation rate stood at 24.48 per cent in January 2025, according to the National Bureau of Statistics. This figure, however, reflects a recalculated Consumer Price Index following the rebasing of inflation metrics.

Under the previous methodology, the inflation rate was reported at 34.80 per cent in December 2024. At its last meeting, the CBN raised the Monetary Policy Rate by 25 basis points to 27.50 per cent, continuing a tightening cycle that saw six consecutive rate hikes in 2024.

However, with inflation appearing to have moderated under the rebased CPI, there have been calls from economic analysts and business groups to pause further rate increases.

The Centre for the Promotion of Private Enterprise earlier urged the CBN to halt further monetary tightening, arguing that fiscal policy interventions should now take precedence in addressing inflationary pressures.

The Chief Executive Officer of CPPE, Dr Muda Yusuf, stressed that increasing interest rates further could stifle economic growth at a time when businesses need access to affordable credit.

With money supply at an all-time high and inflation concerns still present, the MPC’s decision this week will set the monetary policy direction for 2025.