Nigeria’s broad money supply saw a slight decrease in May 2025, marking the second monthly dip this year, according to new figures released by the Central Bank of Nigeria (CBN). The total supply fell to ₦119.01 trillion, reflecting a month-on-month drop of ₦292.75 billion or 0.25%, compared to the ₦119.30 trillion recorded in April.
The year’s first drop occurred in February when broad money supply declined to ₦110.32 trillion from ₦110.94 trillion in January.
Despite this marginal decrease in May, the overall money supply remains near record highs—a lingering result of past liquidity surges and continued monetary policy shifts. Year-on-year data tells a broader story: from May 2024 to May 2025, money supply surged by ₦19.77 trillion, a 19.9% increase, rising from ₦99.24 trillion.
Structural Changes in Nigeria’s Liquidity
The latest breakdown reveals a changing composition of the country’s liquidity sources. Net foreign assets dropped sharply by ₦4.05 trillion (or 8.1%), from ₦49.87 trillion in April to ₦45.81 trillion in May. This decline likely reflects reduced foreign inflows or withdrawals from Nigeria’s external reserves.
In contrast, net domestic assets grew from ₦69.43 trillion to ₦73.19 trillion in May—an increase of ₦3.76 trillion or 5.4%. This domestic boost helped cushion the overall decline in foreign liquidity.
M2 and M1 Reflect Tighter Financial Conditions
The intermediate measure of money supply, known as M2, also recorded a slight drop, from ₦119.28 trillion in April to ₦118.99 trillion in May, a decrease of ₦283 billion or 0.24%. This mirrors the trend in the broader M3 metric and reflects ongoing monetary tightening.
Narrow money supply (M1), which includes physical currency and demand deposits, declined more noticeably, falling from ₦41.00 trillion in April to ₦40.38 trillion in May. That’s a ₦624.5 billion or 1.5% drop in the most liquid parts of the money supply.
Still, M1 remains elevated compared to the previous year. In May 2024, M1 stood at ₦33.38 trillion, indicating a 20.9% year-on-year increase—further proof that Nigeria’s financial system still contains high liquidity levels, despite efforts to curb it.
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External Assets Fuel Yearly Growth
Between May 2024 and May 2025, the overall increase in M3, nearly ₦20 trillion, was driven mainly by a massive jump in net foreign assets, which grew from ₦15.34 trillion to ₦45.81 trillion. This staggering 198% increase is likely the result of favourable external conditions, including better oil earnings, Eurobond inflows, and increased diaspora remittances.
Conversely, net domestic assets fell by ₦10.71 trillion over the same period, down from ₦83.90 trillion in May 2024 to ₦73.19 trillion. This points to tighter domestic credit, reduced government borrowing, or a more cautious CBN balance sheet.
Monetary Policy Making an Impact
The CBN’s tight monetary stance—reflected in elevated interest rates and active liquidity mop-ups via open market operations—is starting to yield results. The latest data shows a measurable impact, particularly in the decline of the most liquid monetary aggregates like M1.
Whether this trend continues into the second half of 2025 will depend on how well the apex bank manages the competing pressures of inflation control, exchange rate stability, and fiscal demands.
