Nigeria’s Money Supply Hits N124.4tn as Government Credit Surges
Nigeria money supply (M²) rose to N124.4 trillion in December 2025, according to the Central Bank of Nigeria’s (CBN) Money and Credit Statistics report released over the weekend.
The growth, which represents a 1.2 percent month-on-month (MoM) increase from N122.9 trillion in November, signals an expansion in liquidity amid rising government borrowing and continued credit growth to the private sector.
The increase in Nigeria’s money supply was driven largely by growth in the narrow money component (M¹), which climbed by 4.05 percent MoM to N42.14 trillion in December from N40.5 trillion in November.
Demand deposits, a key driver of M¹, rose by 3.08 percent to N36.7 trillion from N35.6 trillion, while currency outside banks (COB) recorded a notable jump of 10.2 percent to N5.4 trillion from N4.9 trillion.
However, the CBN data showed that quasi-money, which includes savings deposits and time deposits, fell slightly by 0.18 percent to N82.25 trillion in December from N82.4 trillion in the previous month.
The decline indicates a shift in liquidity preference among depositors, potentially reflecting a higher need for readily accessible funds.
Nigeria’s Money Supply Growth Driven by Government Credit
Nigeria’s money supply growth in December also reflected a surge in bank credit to the government. Credit to the government rose sharply by 29.5 percent MoM to N34.2 trillion in December from N26.35 trillion in November.
The rise in government borrowing is consistent with the fiscal authority’s need to fund budgetary commitments and manage debt obligations.
The private sector also benefited from modest credit expansion, with bank lending rising by 1.6 percent MoM to N75.8 trillion in December from N74.6 trillion.
The data suggest that banks continued to support business activities, albeit at a slower pace than government borrowing.
The combined effect of the government and private sector credit growth resulted in net domestic credit increasing by 13.9 percent MoM to N115.06 trillion in December from N100.98 trillion in November.
The expansion in net domestic credit, a major driver of Nigeria’s money supply, underscores the CBN’s efforts to support economic activity through increased liquidity.
However, it also raises concerns about inflationary pressure, as higher money supply can translate into increased spending and price instability if not matched by output growth.
Cash Circulation Rises Despite Digital Payment Push
The CBN report also showed that currency in circulation rose by 9.6 percent MoM to N5.7 trillion in December 2025 from N5.2 trillion in November.
The increase comes despite the continued push toward electronic payment systems and the Central Bank’s ongoing efforts to reduce cash dependency.
Analysts say the rise in currency in circulation could be driven by increased transactional needs during the festive season, heightened cash demand in the informal sector, and a lack of confidence in digital payment infrastructure in some regions.
The surge in cash circulation adds another dimension to Nigeria’s money supply growth, indicating that physical cash still plays a significant role in the economy even as digital transactions expand.
Policy Implications for Monetary Authorities
Monetary policy experts warn that the growth in Nigeria’s money supply, if not matched by productivity gains, may lead to higher inflationary pressures in the coming months. With the inflation rate already elevated in Nigeria, sustained liquidity growth could exacerbate the cost of living for households.
At the same time, the increase in government credit points to rising fiscal dependence on bank financing, which may crowd out private sector lending and dampen investment. The central bank will need to balance its monetary stance to ensure that credit growth supports economic recovery without triggering excessive inflation.
The CBN has maintained an accommodative monetary policy stance in recent months, aimed at supporting growth. But the rising money supply and increased government borrowing may force policymakers to reassess their approach, particularly if inflation expectations rise.
What the Numbers Mean for Nigerians
For consumers and businesses, the rise in Nigeria’s money supply signals increased liquidity in the economy, which could translate into more credit availability. However, it also suggests that the government’s borrowing needs are intensifying, potentially leading to higher interest rates in the future.
Analysts say Nigerians should watch key indicators such as inflation, interest rates, and credit growth in the coming months. The ability of the economy to absorb increased liquidity without triggering inflation will determine the sustainability of the current trend.
As Nigeria’s money supply grows, the CBN faces the challenge of managing liquidity to support growth while maintaining price stability. The coming months will be crucial in determining whether the increased money supply will translate into economic expansion or inflationary pressure.
