Broad Money Supply Rises to N119 Trillion in April – CBN

The Central Bank of Nigeria (CBN) has reported a notable increase in the country’s broad money supply (M3), which surged by 4.2 percent month-on-month to reach N119.1 trillion in April 2025. This figure represents a rise from N114.2 trillion recorded in March, underscoring significant liquidity expansion in the Nigerian economy despite ongoing monetary policy stability.

This increase occurred even as the CBN held its Monetary Policy Rate (MPR) steady at 27.5 percent for the second consecutive meeting. The decision to maintain the MPR reflected a cautious approach by the bank amid uncertainties in the global economic environment, including inflationary pressures and fluctuating commodity prices. By holding rates steady, the CBN signaled a preference for closely monitoring economic conditions before embarking on further tightening or easing of monetary policy.

The broad money supply, or M3, is a key indicator of liquidity in the financial system, encompassing currency in circulation, demand deposits, savings deposits, time deposits, and other liquid assets. Changes in M3 have direct implications for inflation, credit availability, and economic growth, making it an important measure for policymakers, investors, and businesses.

Components of Money Supply

The increase in M3 in April was driven by growth in both narrow money (M1) and quasi money. Narrow money, which includes currency outside banks and demand deposits, rose by 6.2 percent month-on-month, reaching N41 trillion in April, up from N38.6 trillion in March. This rise indicates greater transactional liquidity in the economy, facilitating increased spending and business activities.

Demand deposits specifically grew by 7.4 percent, climbing to N36.4 trillion in April from N33.9 trillion the previous month. This suggests that more funds were readily available in checking accounts, which are often used for day-to-day transactions by individuals and businesses.

On the other hand, currency outside banks, representing physical cash circulating in the economy, experienced a slight decline of 0.4 percent, dropping from N4.59 trillion in March to N4.57 trillion in April. This marginal decrease could reflect a preference for digital transactions and bank deposits over cash holdings amid ongoing financial inclusion efforts.

Quasi money, which comprises savings deposits, time deposits, and other near-money assets, increased by 3.17 percent month-on-month to N78.1 trillion in April, up from N75.7 trillion in March. The growth in quasi money reflects an expansion in longer-term liquid assets held by businesses and households, signaling confidence in the financial system and an appetite for saving.

Credit Developments

Credit trends during April showed a mixed picture. Credit to the private sector increased by 2.1 percent month-on-month, rising from N76.3 trillion in March to N77.9 trillion. This growth in private sector lending is a positive signal for economic activity, as it suggests businesses and consumers are accessing financing to invest, expand operations, or meet consumption needs.

In contrast, credit extended to the government fell sharply by 8.8 percent, declining from N25.9 trillion in March to N23.6 trillion in April. This marked the second consecutive month of reduction in government borrowing from the banking sector. The decline may reflect ongoing fiscal consolidation efforts aimed at reducing government reliance on domestic debt financing to manage inflation and interest rates.

As a result of these opposing credit trends, net domestic credit fell by 0.61 percent month-on-month, from N102.13 trillion in March to N101.5 trillion in April. Net domestic credit measures the total credit supplied to the economy minus credit to the government, thus providing a clearer picture of funds available to the private sector.

Economic and Policy Implications

The surge in broad money supply amid a stable monetary policy rate suggests that liquidity is growing organically in the Nigerian economy. This could be driven by increased economic activity, higher government spending outside of bank borrowing, or inflows of foreign exchange supporting deposits.

The growth in private sector credit is particularly encouraging, as it indicates that businesses and households may be expanding operations and consumption, which are vital components of economic growth. However, policymakers will need to balance liquidity growth against inflation risks, especially in an environment where inflation remains above target levels.

The slight decrease in physical currency in circulation, alongside increased demand deposits, aligns with Nigeria’s push toward greater digital financial inclusion. Efforts by the CBN and other stakeholders to promote electronic payments, mobile banking, and cashless transactions appear to be gaining traction, reducing the economy’s reliance on cash and improving transaction efficiency.

The decline in government credit from the banking sector suggests fiscal discipline and a shift towards alternative financing sources such as bonds or external borrowing. This can help ease upward pressure on interest rates and create more room for private sector borrowing.

The CBN’s decision to maintain the MPR at 27.5 percent reflects the complexity of balancing inflation control with economic growth. While tightening monetary policy further could help curb inflation, it might also constrain credit availability and dampen economic recovery efforts. Conversely, lowering rates prematurely risks fuelling inflationary pressures.

Outlook

Going forward, the CBN will continue to monitor monetary aggregates, inflation trends, exchange rate developments, and other economic indicators closely. Maintaining stability in the financial system while supporting economic growth remains the central challenge for policymakers.

The increase in money supply and credit to the private sector signals an expanding economy, but inflation remains a concern. How the CBN navigates these dynamics through interest rate adjustments, liquidity management, and coordination with fiscal authorities will be key to sustaining growth and maintaining price stability.

For businesses, investors, and consumers, understanding these monetary trends helps in planning and decision-making. The continued availability of credit and liquidity is vital for investment and consumption, which drive the Nigerian economy’s performance.

In summary, the April figures from the CBN highlight both opportunities and challenges. The expansion in broad money supply and private sector credit points to growing economic activity and financial system development, while the cautious monetary stance reflects ongoing risks in the macroeconomic environment. The coming months will reveal how these factors balance out as Nigeria’s economy progresses through 2025.