Nigeria’s Money Supply Records First Decline in 2025, Drops to N110.32 Trillion in February

 In February 2025, Nigeria’s money supply experienced a contraction, marking its first decline of the year. The total money supply decreased by 0.56%, falling from N110.94 trillion in January to N110.32 trillion. This development aligns with the Central Bank of Nigeria’s (CBN) ongoing efforts to manage liquidity within the financial system through monetary tightening and exchange rate stabilization measures.

Despite this monthly dip, the year-on-year analysis reveals a 15.45% increase compared to the N95.56 trillion recorded in February 2024. This indicates that over the past year, the monetary base has expanded significantly, reflecting broader economic dynamics and policy implementations. ​

A closer examination of the components contributing to the February decline shows that net foreign assets (NFA) experienced a notable reduction of 8.62%, dropping from N35.39 trillion in January to N32.34 trillion. This decrease, amounting to over N3 trillion, may be attributed to factors such as diminished external reserves or increased foreign exchange interventions by the CBN aimed at stabilizing the naira. ​

Conversely, net domestic assets (NDA) saw an increase of 3.21%, rising from N75.55 trillion in January to N77.97 trillion in February. This suggests a continued expansion in credit within the domestic economy, encompassing both government and private sector lending activities. 

The broad money supply, referred to as M2, which excludes certain large time deposits and institutional instruments, also mirrored this trend with a slight decline. M2 decreased from N110.93 trillion in January to N110.31 trillion in February, representing a 0.56% contraction. However, on a year-on-year basis, M2 exhibited a growth of 17.39% compared to N93.97 trillion in February 2024, underscoring the overall monetary expansion influenced by government spending and fiscal policies. ​

In contrast, the narrow money supply, which includes currency in circulation and demand deposits, experienced a 2.18% increase in February, climbing from N36.77 trillion in January to N37.57 trillion. This uptick may reflect heightened transactional demand for cash and short-term liquidity needs within the economy. ​

These monetary dynamics highlight the delicate balance the CBN must maintain in its policy decisions to ensure economic stability, control inflation, and foster sustainable growth within Nigeria’s complex financial landscape.