By Bakare Ogunleye
Nigeria’s money supply has declined for the second time this year, falling to ₦119.01 trillion in May 2025, according to the latest data released by the Central Bank of Nigeria (CBN).
The contraction represents a ₦2.47 trillion drop from ₦121.48 trillion recorded in April 2025, highlighting continued liquidity tightening in the financial system amid ongoing monetary policy adjustments aimed at curbing inflation and stabilizing the naira.
This is the second consecutive monthly decline in 2025, signaling that the CBN’s aggressive interest rate stance and other liquidity management tools may be beginning to slow down excess cash flow in the economy.
Analysts say the reduction in broad money supply (M3)—which includes currency in circulation, demand deposits, savings, and quasi-money—is largely attributed to the CBN’s hawkish monetary policy, including higher benchmark interest rates and tighter credit conditions across the banking sector.“The persistent drop in money supply shows the CBN is committed to its tightening cycle. However, it also raises concerns about credit availability for businesses and economic growth,” said Nkemdilim Okezie, an economist at MarketFront Research.
The apex bank has raised the Monetary Policy Rate (MPR) multiple times in recent quarters, pushing it to 24.75% as part of efforts to combat inflation, which remains in double digits. At the same time, the naira continues to face depreciation pressure, and capital flows remain subdued.
Experts warn that while the contraction may help temper inflationary trends in the short term, prolonged tight liquidity could slow down private sector lending and stifle economic momentum, particularly for small and medium enterprises (SMEs) seeking affordable capital.
The latest figures come as Nigeria grapples with multiple macroeconomic challenges, including high inflation, currency volatility, and sluggish investment inflows. Policymakers now face the delicate task of balancing inflation control with the need to support economic activity.
The CBN is expected to release further guidance during its next Monetary Policy Committee (MPC) meeting, where market participants will be watching closely for any adjustments to the tightening strategy or signals on easing if inflation begins to moderate.
With the money supply trend now pointing downward for a second time this year, financial observers believe the rest of 2025 will be shaped by how well the CBN manages liquidity without choking off growth.
