Nigeria’s monetary landscape in April 2025 was marked by a record surge in money supply, reaching N119.11 trillion, a 22.9% year-on-year increase. This substantial expansion, reflecting robust growth in both net foreign assets and net domestic assets, presented a complex challenge for the Central Bank of Nigeria (CBN) as it sought to balance economic growth with price stability. The surge in liquidity, while potentially beneficial for economic activity, carried the risk of reigniting inflationary pressures, undermining the recent modest easing of headline inflation from 24.23% in March to 23.71% in April. The CBN’s tight monetary policy stance, maintaining the Monetary Policy Rate at 27.5% for the second consecutive month, underscored the bank’s cautious approach as it monitored the impact of previous rate hikes. The delicate balance between encouraging economic growth and controlling inflation became the central theme of Nigeria’s monetary policy narrative.
The significant increase in net foreign assets to N47.76 trillion, a 66.3% year-on-year jump, played a crucial role in the overall money supply expansion. This surge was attributed to several factors, including increased crude oil receipts, higher remittance inflows, and multilateral funding. The CBN’s ongoing reforms in the foreign exchange market, aimed at improving dollar liquidity and stabilizing the naira, also contributed to the growth in external reserves. The improved foreign exchange position provided a cushion against external shocks and offered some flexibility in managing the domestic monetary environment. However, the CBN remained vigilant about potential inflationary risks stemming from the increased liquidity.
While net foreign assets fueled the bulk of the money supply expansion, net domestic assets also saw a moderate increase, reaching N71.34 trillion, a 4.5% year-on-year rise. This slower growth in domestic assets indicated that credit expansion, particularly to the private sector, remained somewhat constrained by the prevailing high interest rates. The CBN’s decision to maintain a tight monetary policy stance was likely aimed at controlling domestic credit growth and mitigating potential inflationary pressures arising from increased liquidity. This cautious approach reflected the CBN’s commitment to maintaining price stability while supporting economic recovery.
The growth in M2 money supply, which includes readily accessible funds like savings and demand deposits, mirrored the broader M3 trend, also reaching N119.08 trillion. This close alignment between M2 and M3 indicated that the surge in liquidity was primarily concentrated in short-term financial instruments rather than longer-term deposits. This further highlighted the potential for rapid transmission of increased liquidity into the economy, potentially exacerbating inflationary pressures if not carefully managed. The CBN’s ongoing monitoring of monetary aggregates and its cautious approach to policy adjustments reflected the bank’s awareness of these potential risks.
Narrow money (M1), comprising currency in circulation and demand deposits, experienced a significant increase to N41.01 trillion, a 21.3% rise year-on-year and a notable 6.4% month-on-month jump. This increase in M1, the most liquid component of the money supply, underscored the potential for intensified inflationary pressures if not effectively managed. The CBN’s challenge lay in balancing the need to support economic activity through adequate liquidity with the imperative to control inflation. The rising M1 metric further emphasized the delicate balancing act the CBN faced in managing the monetary landscape.
The surge in Nigeria’s money supply in April 2025 presented a complex economic puzzle. The simultaneous expansion of M3, M2, and M1, fueled by both external and domestic factors, posed a significant challenge to the CBN’s efforts to manage inflation. While the increased foreign exchange reserves offered a buffer against external shocks, the substantial increase in readily accessible funds (M1 and M2) created the potential for renewed inflationary pressures. The CBN’s decision to maintain a tight monetary policy, holding the MPR steady at 27.5%, reflected the bank’s cautious approach as it sought to balance the need to support economic growth with the imperative to control inflation. The evolving monetary dynamics underscored the delicate balancing act faced by the CBN as it navigated the complexities of Nigeria’s economic landscape.
