By Favour Pius
Nigeria’s broad money supply fell to ₦123.15 trillion in February 2026, reflecting tightening liquidity conditions in the financial system amid sustained monetary policy efforts to curb inflation and stabilise the economy.
Latest data from the Central Bank of Nigeria (CBN) showed that the decline represents a moderation from the previous month, signalling the impact of ongoing liquidity management measures by the apex bank.
Analysts say the contraction in money supply—commonly measured as M3—suggests a deliberate policy stance by the CBN to reduce excess liquidity in circulation, which has been identified as a key driver of inflationary pressures in the economy.
The development comes as Nigeria continues to grapple with elevated inflation, rising interest rates, and exchange rate volatility, prompting the monetary authorities to adopt a tighter policy framework.
Experts note that a reduction in money supply typically results from a combination of factors, including increased cash reserve requirements for banks, aggressive open market operations, and higher interest rates designed to mop up excess funds from the banking system.
“This indicates that the central bank is maintaining a tight monetary stance,” a Lagos-based economist said. “By reducing liquidity, the CBN is attempting to moderate demand-side pressures that contribute to inflation.”
Industry watchers also point to reduced net domestic assets and possible moderation in credit growth as contributing factors to the decline in money supply.
The contraction has implications for borrowing costs and access to credit, as tighter liquidity conditions tend to push interest rates higher, affecting businesses and households seeking financing.
From an industry perspective, financial sector operators say the trend could constrain lending activities, particularly to the real sector, as banks become more cautious in extending credit under a high-interest-rate environment.
They warn that while the policy may help stabilise prices in the medium term, it could also slow economic growth if credit to productive sectors remains constrained.
“Liquidity tightening is a double-edged sword,” a financial analyst noted. “It helps control inflation but can also dampen investment and consumption if not carefully managed.”
Market participants further observe that the decline in money supply may support exchange rate stability by reducing speculative demand for foreign currency, especially in an environment where naira volatility has been a persistent concern.
The development also aligns with broader macroeconomic reforms aimed at restoring investor confidence, improving fiscal discipline, and strengthening monetary policy transmission.
However, analysts stress that the effectiveness of the tightening measures will depend on complementary fiscal policies, including efforts to boost revenue, manage government borrowing, and support key sectors of the economy.
As the CBN continues to navigate the delicate balance between price stability and economic growth, stakeholders expect monetary policy decisions in the coming months to remain data-driven, with close attention to inflation trends, liquidity levels, and overall macroeconomic stability.
