By Chinwendu Obienyi
Nigeria’s economic activities could suffer potential slowdown following its first decline in money supply which fell to N110.32 trillion at the end of February 2025, financial analysts said on Thursday.
Data obtained from the Central Bank of Nigeria (CBN) revealed that money supply in the country dipped by 0.56 per cent on a month-to-month basis from N110.94 trillion recorded in January 2025.
The 0.56 per cent month-on-month drop comes amid continued efforts by the apex bank to manage liquidity in the system, following earlier signals of monetary tightening and foreign exchange adjustments.
Despite the marginal slowdown, the figure remains significantly higher compared to the same period last year. In February 2024, money supply stood at N95.56 trillion, indicating a year-on-year (y/y) increase of 15.45 per cent.
A closer review of the underlying components shows that net foreign assets dropped by 8.62 per cent to N32.34 trillion in February, down from N35.39 trillion in the previous month.
This represents a reduction of over N3 trillion and may be linked to lower external reserves or increased foreign exchange interventions by the central bank aimed at stabilising the naira.
Meanwhile, net domestic assets dipped slightly from N88.15 trillion over the same period, possibly pointing to a reallocation within the financial system driven by changing policy direction.
Also, the total credit to the private sector declined to N73.66 trillion in February 2025, continuing a downward trend from N74.92 trillion in January and N75.96 trillion in December 2024.
Reacting to the data, analysts noted that the decline in money supply and credit to the private sector could have significant implications for Nigeria’s economic growth.
The Vice-Chairman, Board, Highcap Securities Ltd, David Adonri, explained that the decline could reduce access to funding which may limit business expansion, job creation, and investment in key sectors such as manufacturing, agriculture, and technology.
“Prolonged credit contraction may slow down economic activities and undermine efforts to stimulate growth and investment. Do not forget that the government’s expenditure plan of N49.74 trillion for 2025 is still on course. But with this declines, it is likely going to face significant hurdles, with revenue collections likely to fall short of projected targets.
“Debt servicing consumed 147 per cent of retained revenue in 2024, up from 132 per cent in 2023, highlighting growing fiscal strain. Inflation, which surged to 34.8 per cent in late 2024, has shown signs of slowing (23.18 per cent) but remains high,”Adonri said.
Commending the CBN for its recent reforms and guidelines, he called on the federal government to expand tax compliance and streamline exemptions, which boosted Federation revenues from 5.5 per cent to 8.7 per cent of GDP in 2024 and reduce reliance on deficit monetization (Ways and Means Advances) to prevent inflationary debt spirals.
“The CBN’s current trajectory has shown early signs of success, with reduced FX speculation and improved reserve stability. However, sustaining growth requires coordinated fiscal-monetary efforts, particularly in mitigating trade-offs between inflation control and economic expansion”, he concluded.