Nigeria’s Money Supply Soars to N114tn Despite Record-High CRR by CBN
Nigeria’s broad money supply surged to ₦114.22 trillion in March 2025, despite the Central Bank of Nigeria (CBN) implementing the world’s highest Cash Reserve Ratio (CRR) at 50 percent to tighten liquidity and combat inflation.
Data released by the apex bank show a 24% year-on-year increase from ₦92.19tn in March 2024 and a 3.2% rise from February’s ₦110.71tn, reflecting an upward trend in monetary growth.
What’s Fueling the Surge?
A key driver of the growth was a sharp 38.9% increase in net foreign assets, which hit ₦45.17tn, suggesting rising capital inflows and revaluation gains. However, net domestic assets declined by 11.7% to ₦69.05tn, indicating tightened liquidity in local financial systems.
Despite the CBN’s aggressive monetary policy stance, broad money (M3) rose 2.8% in Q1 2025, growing from ₦111.11tn in January to ₦114.22tn in March—highlighting the challenge in curbing monetary expansion.
Cash Still King in Nigeria’s Economy
According to the CBN, the volume of currency outside the banking system rose to ₦4.6tn out of ₦5.00tn total in circulation, meaning 91.9% of all naira cash is held by individuals, not banks. This marks a 26.7% increase from the ₦3.63tn held outside banks in March 2024.
This persistent trend signals a heavy reliance on physical cash—especially across Nigeria’s informal sector—where banking trust and digital infrastructure remain weak.
Inflation Pressures and Public Behavior
As of March 2025, headline inflation climbed to 24.23%, up from 23.18% in February. Month-on-month inflation also jumped by 3.90%, prompting fears over consumer spending power and savings erosion.
The inflationary trend—combined with issues like failed transfers, ATM errors, and poor digital banking services—has pushed more Nigerians to prefer cash, especially for immediate access and negotiability.
Tight Monetary Policy Faces Dilemma
The CBN’s benchmark Monetary Policy Rate (MPR) stands at 27.50%, one of the top five highest rates globally, behind Venezuela (59.4%), Turkey (45%), Zimbabwe (35%), and Argentina (29%).
A member of the Monetary Policy Committee, Mustapha Akinkunmi, said this ranking reflects the country’s struggle with inflation and naira volatility.
With the next MPC meeting scheduled for May 19–20, experts expect a possible rate hike to counter persistent inflation, though concerns persist that further tightening may hinder economic growth and raise borrowing costs.
Global Support for CBN’s Strategy
The International Monetary Fund (IMF), after concluding its Article IV consultation with Nigeria on April 15, 2025, commended the CBN’s data-driven approach and recommended announcing a formal disinflation path to guide expectations.
“The Monetary Policy Committee’s data-dependent approach has served Nigeria well. A disinflation path can help anchor inflation expectations,” the IMF noted.
References
Nigeria’s Money Supply Soars to N114tn Despite Record-High CRR by CBN