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By Chinwendu Obienyi
Nigeria’s broad money supply has risen sharply in May 2026 to N129.21 trillion from N124.99 trillion in April, According to the latest data from the Central Bank of Nigeria(CBN), the improvemnt in money supply was driven largely by an expansion in both banks’ foreign and domestic asset positions.
This, it said, underscores persistent liquidity growth in the financial system despite the CBN’s tight monetary stance.
Broad money (M3), which captures the widest measure of money in circulation, includes currency outside the banking system, demand deposits, savings and time deposits, as well as foreign currency deposits.
Its expansion indicates that more liquidity is available within the economy, whether for consumption, investment, or financial transactions.
According to the data, the increase represents a month-on-month rise of N4.22 trillion or 3.38 per cent. On a year-on-year basis, M3 also expanded from N119.20 trillion in May 2025, pointing to sustained liquidity growth over the past 12 months.
The expansion was primarily supported by gains in net foreign assets (NFA) and net domestic assets (NDA), reflecting a broad-based build-up in the banking system’s balance sheet.
Net foreign assets rose significantly to N26.95 trillion in May, up from N24.01 trillion in April, indicating stronger external asset accumulation within the financial system. This increase suggests improved foreign currency inflows or valuation gains on external holdings, which in turn added to overall liquidity conditions.
At the same time, net domestic assets climbed to N102.26 trillion in May from N100.97 trillion in April, reflecting continued expansion in domestic financial operations. This includes growth in credit to the private sector, government securities holdings, and other domestic financial claims held by banks.
The simultaneous increase in both foreign and domestic asset positions highlights the dual engines driving money supply growth.
A breakdown of monetary aggregates showed that quasi-money, comprising savings and time deposits, rose to N84.58 trillion in May from N81.22 trillion in April. This suggests that a significant portion of liquidity remained within the banking system in interest-bearing accounts rather than being held as cash.
Currency in circulation and demand deposits also contributed to the overall increase in narrow money (M2), which stood at N129.20 trillion in May, up from N124.98 trillion in April.
Conversely, the rise in money supply occurred despite the CBN maintaining a restrictive monetary policy stance. At its 305th Monetary Policy Committee meeting, the apex bank retained the Monetary Policy Rate (MPR) at 26.50 per cent alongside other key policy parameters. The decision was aimed at sustaining disinflation efforts and anchoring macroeconomic stability amid persistent price pressures.
However, the continued growth in monetary aggregates suggests that liquidity conditions remain relatively accommodative, potentially complicating the central bank’s inflation management efforts.
Economic experts often view rapid money supply expansion as a precursor to inflationary pressures if not matched by corresponding output growth.
The rise in both foreign and domestic assets also points to evolving dynamics in Nigeria’s financial system, where external inflows and domestic credit expansion are jointly shaping liquidity conditions.
Going forward, the MPC will closely monitor these trends as it balance the dual objectives of supporting economic growth while containing inflation and stabilising the exchange rate.
