Nigeria’s broad money supply rose to N114.22tn in March 2025, defying the Central Bank of Nigeria’s aggressive monetary tightening measures, including a historic hike in the Cash Reserve Ratio to 50 per cent.
According to the latest money and credit statistics released by the apex bank, the March figure marks a 24 per cent year-on-year increase from N92.19tn recorded in March 2024. On a month-on-month basis, the money supply climbed by 3.2 per cent from N110.71tn in February 2025.
The sharp increase was largely driven by a significant surge in net foreign assets, which jumped by 38.9 per cent to N45.17tn. This suggests stronger capital inflows and potential revaluation gains during the period. Conversely, net domestic assets fell by 11.7 per cent to N69.05tn, reflecting reduced liquidity within the local financial system amid tightening efforts.
Despite the CBN’s implementation of what is now the highest CRR in the world, aimed at curbing inflation and reducing excess liquidity, the monetary base has continued to expand. Analysts believe the growth in foreign asset accumulation and government credit may have offset the tightening impact.
Between January and March 2025, broad money supply (M3) increased by 2.8 per cent, rising from N111.11tn to N114.22tn, further underlining the persistent monetary expansion.
A key highlight of the data was the volume of currency circulating outside the banking system. As of March, N4.6tn of the total N5.00tn currency in circulation was held outside banks, meaning 91.9 per cent of all cash in the economy remained in the hands of the public. This represents a 26.7 per cent increase from the N3.63tn recorded outside banks in March 2024, when the total currency in circulation stood at N3.87tn.
This preference for cash was evident throughout the first quarter of 2025. In January, N4.74tn—representing 90.5 per cent of the total—was outside the banking system, while February recorded N4.52tn or 89.6 per cent.
The continued dominance of physical cash underscores deep-rooted structural issues, particularly in the informal sector, where trust in digital banking platforms remains low and financial inclusion is still evolving. While the government and CBN have consistently promoted cashless transactions, behavioural and infrastructural challenges persist.
With inflation continuing to rise and prices of goods escalating, many Nigerians have resorted to holding physical cash for ease of access and flexibility in transactions. According to the National Bureau of Statistics, headline inflation rose to 24.23 per cent in March, up from 23.18 per cent in February, while month-on-month inflation surged by 3.90 per cent.
Recurring issues with digital banking platforms—including failed transfers, ATM malfunctions, and unsatisfactory customer service—have further eroded public confidence in formal financial systems, reinforcing reliance on cash.
The CBN data also revealed growth in other monetary aggregates. M2, which includes savings and time deposits but excludes large institutional holdings, increased to N114.20tn in March, up from N91.95tn a year earlier. Similarly, narrow money (M1), which comprises currency and demand deposits, grew to N38.55tn, a 19.7 per cent rise year-on-year.
This persistent increase in money supply poses a significant challenge for the Monetary Policy Committee, which is scheduled to meet on May 19 and 20, 2025. At its last meeting in February, the MPC opted to hold the Monetary Policy Rate steady at 27.50 per cent, despite rising inflation and liquidity pressures.
The 27.50 per cent MPR—the interest rate at which the CBN lends to commercial banks—is currently the fifth highest in the world, according to Mustapha Akinkunmi, a member of the CBN’s MPC.
In his personal statement released after the 299th MPC meeting held from February 19 to 20, Akinkunmi explained that, “This rate, which was raised six times in 2024, is only lower than that of Argentina, with an interest rate of 29 per cent; Zimbabwe, with 35 per cent; Turkey, 45 per cent interest rate; and the highest rate of 59.4 per cent MPR in Venezuela.”
Akinkunmi, a seasoned economist, added that the elevated policy rate reflects Nigeria’s ongoing struggle with inflation, currency depreciation, and broader economic instability.
In a separate development, the International Monetary Fund has weighed in on Nigeria’s monetary policy direction. In a statement issued at the end of its Article IV consultation mission to Nigeria, which held between April 2 and 15, 2025, the IMF advised the CBN to sustain a tight monetary stance to ensure continued disinflation.
“The Monetary Policy Committee’s data-dependent approach has served Nigeria well and will help navigate elevated macroeconomic uncertainty. Announcing a disinflation path to serve as an intermediate target can help anchor inflation expectations,” the IMF stated.
The Fund commended the MPC’s adherence to evidence-based policymaking and noted that setting a formal disinflation path could help guide market expectations and enhance credibility.
