By Naija247news Business Desk | October 1, 2025
Nigeria’s broad money supply (M3) has climbed to a record ₦199.5 trillion as of August 2025, rising by 11.5 percent year-on-year, even as credit to the private sector fell to ₦73.83 trillion, the latest Central Bank of Nigeria (CBN) data show.
The surge in money supply underscores the CBN’s tight monetary policy stance aimed at stabilising inflation and currency volatility. However, analysts warn that the contraction in private sector credit could signal weaker lending activity, with implications for investment and job creation.
Banks’ Liquidity Jumps After OMO Repayments
Commercial banks’ deposits with the CBN through the Standing Deposit Facility (SDF) hit an unprecedented ₦5.5 trillion on Tuesday, following the repayment of Open Market Operation (OMO) bills worth ₦731.13 billion.
The liquidity surge came after a series of OMO repayments in September 2025 totaling ₦1.2 trillion, alongside inflows from the Federation Account Allocation Committee (FAAC) disbursements.
OMO, a key monetary tool, is used by the CBN to mop up excess liquidity, regulate inflation, and stabilise interest rates. Strong demand was recorded for the January 6, 2026 OMO bill, with yields dropping 180 basis points amid investor appetite.
Money Supply Expands Despite Decline in Currency Circulation
According to the CBN, money supply rose to ₦119.52 trillion in August 2025 from ₦107.19 trillion in the same period of 2024. On a monthly basis, M3 expanded by 1.7 percent from June’s ₦117.49 trillion.
Currency in circulation, however, fell 18.84 percent year-on-year to ₦4.92 trillion, compared to ₦6.14 trillion in August 2024. Analysts attribute the decline to the CBN’s tightening stance and lingering effects of the naira redesign policy, which encouraged more digital transactions.
Private Sector Credit Contracts, Government Borrowing Falls
Private sector credit dipped by 1.2 percent year-on-year, sliding to ₦73.83 trillion in August 2025 from ₦74.73 trillion a year earlier. Month-on-month, it dropped 3 percent from ₦76.14 trillion in June 2025.
Similarly, credit to government fell sharply, plunging 25.75 percent year-on-year to ₦23.13 trillion from ₦31.15 trillion in August 2024. Analysts say the decline reflects reduced government borrowing after FAAC revenues improved on the back of higher oil receipts and foreign inflows.
MPC Members Caution on Inflationary Pressures
Monetary Policy Committee (MPC) members remain divided on the implications of money supply growth.
- Aloysius Uche Ordu noted that the moderation in currency circulation reflected CBN’s tightening stance, with signs of improved monetary transmission through the capital markets.
- Lydia Shehu Jafiya observed that Broad Money (M3) had increased by 43.65 percent year-to-date in June 2025, largely driven by growth in Net Foreign Assets (NFA). She stressed, however, that inflation was more strongly influenced by Net Domestic Assets (NDA).
Outlook
The rise in money supply signals that liquidity remains strong in the banking sector, but declining credit to the private sector poses a challenge to economic growth. Analysts say sustaining reforms to deepen credit markets, while managing inflationary pressures, will be critical for the Tinubu administration as it seeks to stabilize the economy.
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Reporting by Naija247news in Lagos, Nigeria.
