Nigeria’s broad money supply declined for the second time this year, falling slightly to N119.01tn in May 2025, according to fresh data from the Central Bank of Nigeria.

The drop represents a month-on-month contraction of N292.75bn or 0.25 per cent from the N119.30tn recorded in April. The first decline of 2025 was recorded in February, when the figure dropped to N110.32tn from N110.94tn in January.

Despite the slight decline in May, the money supply remains near record highs, reflecting the residual effects of earlier liquidity surges and ongoing adjustments in monetary policy. Year-on-year, the growth is more striking.

Broad money supply expanded by N19.77tn from N99.24tn in May 2024, representing a 19.9 per cent increase and highlighting the scale of monetary expansion over the past 12 months.

A breakdown of the figures shows a shift in the structure of Nigeria’s liquidity base. Net foreign assets, which had risen to N49.87tn in April, dropped sharply to N45.81tn in May, indicating a decline of N4.05tn or 8.1 per cent.

The contraction suggests that Nigeria’s external asset position may have weakened, potentially due to drawdowns on foreign reserves or reduced inflows. In contrast, net domestic assets increased from N69.43tn to N73.19tn within the same period, a rise of N3.76tn or 5.4 per cent.

The rise in domestic liquidity helped offset the fall in foreign assets and prevented a more pronounced contraction in the overall money supply. The contraction extended to M2, the intermediate measure of money supply, which excludes certain institutional holdings.

M2 fell marginally from N119.28tn in April to N118.99tn in May, a decline of N283bn or 0.24 per cent. This mirrors the overall decline in M3 and signals a broader tightening trend in the financial system.

Similarly, narrow money or M1—which includes currency in circulation and demand deposits—also dipped, dropping from N41.00tn to N40.38tn in May. The decline of N624.5bn or 1.5 percentage points points to a reduction in the most liquid forms of cash within the economy.

Despite the month-on-month decline, M1 remains significantly elevated compared to last year. Narrow money stood at N33.38tn in May 2024, indicating a year-on-year increase of 20.9 per cent.

This reinforces the view that the system is still awash with liquidity, even as the CBN intensifies efforts to rein it in. Year-on-year data also show that total money supply (M3) rose by almost N20tn between May 2024 and May 2025.

The surge was largely driven by an expansion in net foreign assets, which jumped from N15.34tn in May 2024 to N45.81tn in May 2025—an increase of over 198 per cent. The sharp rise may be attributed to improved external financing conditions, higher oil revenues, and inflows from Eurobond issuances and diaspora remittances.

However, the increase in foreign assets was accompanied by a decline in domestic liquidity. Net domestic assets dropped by N10.71tn over the same period, from N83.90tn to N73.19tn.

The fall points to a tightening of credit and government borrowing or a scaling back of CBN’s claims on the financial system. The apex bank’s tighter monetary stance—reflected in a high Monetary Policy Rate and aggressive open market operations—is beginning to filter through the system.

The May contraction, especially in the most liquid forms of money, suggests that the measures are having an effect. Whether this trend continues in the second half of the year will depend on how the CBN manages liquidity in the face of fiscal pressures and exchange rate dynamics.