Nigeria’s Money Supply Dips to ₦118 Trillion Amid CBN’s Tightening Grip

By Emmanuel Kwada 

Nigeria’s money supply took a notable hit in September, contracting to approximately ₦118 trillion, as the Central Bank of Nigeria (CBN) presses ahead with its aggressive campaign to tame runaway inflation.

The month-on-month (MoM) decline from ₦119.7 trillion in August marks a subtle but telling shift in the nation’s liquidity landscape, according to the CBN’s latest Money and Credit Statistics Data released on Tuesday. Broad money (M²), which encompasses cash, demand deposits, and other liquid assets, saw all major components weaken except for a modest uptick in currency held outside banks.

At the heart of the drop lies a sharp 5 percent retreat in banks’ overall credit to the economy, which fell to ₦96.7 trillion from ₦98.8 trillion the previous month.

This pullback was largely propelled by a 4.4 percent MoM slump in lending to the private sector, shrinking it to ₦72.5 trillion from ₦75.9 trillion. While credit to the government surged 5.67 percent to ₦24.2 trillion—up from ₦22.9 trillion—the gains weren’t enough to offset the broader contraction in economic financing.

Narrower measures of money echoed the trend. Narrow money (M¹), focusing on the most liquid forms like cash and demand deposits, edged down 0.76 percent to ₦39.1 trillion from ₦39.4 trillion. Quasi-money, which includes less immediate assets such as savings and time deposits, fared worse with a 1.99 percent dip to ₦78.7 trillion from ₦80.3 trillion.

Demand deposits specifically contracted 0.86 percent to ₦34.6 trillion, while the lone bright spot—currency outside banks (COB)—inched up 0.45 percent to ₦4.47 trillion from ₦4.45 trillion, suggesting Nigerians are holding onto more physical cash amid economic jitters.

Economists point to the CBN’s unyielding monetary policy as the chief architect of this liquidity squeeze. Since mid-2023, the apex bank has hiked the Monetary Policy Rate (MPR) by over 800 basis points, ratcheting up borrowing costs and draining excess funds from the system.

Inflation, stubbornly rooted in double digits despite these efforts, has forced the bank’s hand, with officials framing the moves as essential for restoring price stability in Africa’s largest economy.

“This contraction underscores the real-world bite of the CBN’s tightening measures,” said Dr. Aisha Bello, a senior economist at Lagos-based Apex Analytics. “While it may cool inflationary pressures in the long run, the short-term drag on credit availability could crimp private sector growth at a time when businesses are already navigating high fuel costs and naira volatility.”

The data arrives against a backdrop of mixed signals for Nigeria’s recovery. Recent oil price rebounds have bolstered foreign reserves, but persistent supply chain disruptions and fiscal strains continue to weigh on growth projections, now hovering around 3 percent for 2025.

Market watchers will be eyeing the CBN’s next policy meeting for hints on whether the pedal will stay firmly on the brake—or if early signs of easing might emerge.