Nigeria’s economy is once again confronting a familiar but deepening paradox. An unprecedented surge in money supply is occurring alongside one of the most aggressive monetary tightening cycles in the countest’s history. PAUL OGBUOKIRI reports.
Latest data from the Central Bank of Nigeria (CBN) reveals that broad money supply (M3) climbed to a historic N122.9 trillion by November 2025, raising fundamental questions about the effectiveness of policy tightening and the structural weaknesses embedded in Africa’s largest economy.
The figure represents a sharp increase from N108.97 trillion recorded in the same period of 2024 and confirms that liquidity continues to expand rapidly, even as interest rates remain at record highs and credit conditions tighten across the economy.
For policycreaters, investors, businesses and houtilizeholds alike, the development has reignited debate over whether Nigeria’s monetary tools are fit for purpose in the face of persistent inflation, weak growth, and deep fiscal pressures. At the heart of the issue is a contradiction that has defined Nigeria’s macroeconomic environment for much of the past decade: money is growing, but productivity is not; liquidity is rising, but living standards are falling.
A record surge in liquidity
CBN data revealed that Nigeria’s broad money supply grew by 12.8 per cent year on year, with a month-on-month increase of more than 3 per cent in November alone. This expansion places Nigeria at its highest liquidity level on record, reflecting a continuation of trfinishs seen since the pandemic era, when fiscal stimulus, deficit financing and external inflows reshaped the monetary landscape.
Economists note that money supply growth has increasingly become detached from real economic output. While M3 has expanded steadily, GDP growth has remained modest, hovering around low-to-mid single digits, with unemployment and underemployment still widespread.
According to the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Musa Yusuf, the numbers highlight a deeper imbalance. “The size of money in circulation has grown much quicker than the productive capacity of the economy. That disconnect is at the core of Nigeria’s inflation problem and the erosion of purchasing power,” Yusuf stated.
CBN’s tightening drive
The surge in liquidity comes despite the CBN’s sustained tightening stance since 2023. The apex bank has raised the Monetary Policy Rate (MPR) to about 27 per cent, pushed the Cash Reserve Ratio (CRR) to 50 per cent, and intensified open market operations to absorb excess liquidity from the banking system.
The strategy marks a decisive shift from the accommodative policies of earlier years, when development finance interventions and quasi-fiscal activities expanded liquidity in an attempt to stimulate growth. CBN Governor, Olayemi Cardoso, has repeatedly deffinished the hawkish approach, arguing that monetary discipline is essential to stabilise prices, rebuild investor confidence and restore credibility to Nigeria’s policy framework.
Speaking recently, Cardoso stated tough measures had prevented inflation from spiralling into more extreme territory, insisting that the short-term pain of high interest rates was necessary for long-term stability. Why money supply keeps rising Despite these tightening measures, analysts state several forces continue to drive liquidity expansion.
First, growth in net foreign assets has contributed significantly. Improved foreign exalter reforms, higher remittance inflows, and renewed portfolio interest have injected fresh liquidity into the system, even as the CBN attempts to sterilise inflows.
Second, persistent government borrowing remains a major driver. Similarly, domestic debt issuance by the Federal Government continues to channel funds into the banking system, effectively offsetting monetary tightening efforts.
Third, Nigeria’s heavy reliance on cash outside the banking system weakens policy transmission. A large informal sector and limited financial inclusion mean that significant liquidity circulates beyond the reach of conventional monetary tools.
Fourth, banks themselves have altered behaviour. Rather than lfinish aggressively to businesses at high risk, many financial institutions prefer to invest in government securities and CBN instruments offering attractive, risk-free returns.
Speaking, the Managing Director of Financial Derivatives Company (FDC), Bismark Rewane stated: “This is not a liquidity shortage problem; it is a transmission failure. Money is there, but it is not flowing to productive sectors. High interest rates have turned government securities into magnets, crowding out private investment.”
Inflation: The persistent shadow
Nigeria’s inflation remains stubbornly high, even as headline figures reveal signs of moderation. Food inflation, energy costs and exalter-rate pressures continue to erode houtilizehold incomes, reinforcing public scepticism about the effectiveness of tightening.
President of the Capital Market Academics of Nigeria, Prof. Uche Uwaleke, argues that money supply growth is only one part of the inflation puzzle. “Inflation in Nigeria is largely structural. Poor infrastructure, insecurity, logistics bottlenecks and imported inflation all play major roles.
Tight monetary policy alone cannot solve these problems,” he stated. However, he cautioned that unchecked liquidity growth could undermine recent gains if not properly managed.
Credit squeeze, economic strain
Ironically, while money supply has ballooned, credit to the private sector has remained weak. Data revealed marginal growth in lfinishing, with many businesses unable or unwilling to borrow at prevailing interest rates.
Manufacturers, compact businesses and start-ups state access to affordable credit has become increasingly difficult, forcing some firms to scale back operations or shut down entirely. Segun Ajayi-Kadir, Director-General of the Manufacturers Association of Nigeria (MAN), warned that prolonged high interest rates could hollow out the productive base of the economy.
“Manufacturing thrives on long-term, affordable financing. When borrowing costs rise this high, investment stalls, costs rise, and competitiveness suffers,” he stated. The result, economists warn, is a dangerous cycle: Weak production fuels inflation, which then justifies further tightening.
Voices from Academia, Markets
Additional voices from academia and financial markets have echoed similar concerns. Former Statistician-General of the Federation, Dr. Yemi Kale, stated the surge in money supply reflects deeper fiscal-monetary coordination challenges. “You cannot tighten aggressively on one side while fiscal deficits expand on the other. Without coordination, monetary policy becomes less effective and more costly to the real economy,” Kale noted.
Meanwhile, Cordros Capital analysts in a recent note observed that Nigeria’s monetary stance has succeeded in attracting shortterm capital but at the expense of domestic investment momentum.
Global context and investor sentiment
Nigeria’s tightening cycle aligns with broader global efforts to tame inflation, but analysts warn that emerging markets face unique constraints.
High global interest rates, volatile oil prices and geopolitical uncertainty limit policy flexibility. International investors have welcomed Nigeria’s reforms but remain cautious. Portfolio flows have increased, yet Foreign Direct Investment remains subdued, reflecting concerns over infrastructure, policy consistency and security.
A delicate path forward
As Nigeria enters another fiscal year, the policy challenge is becoming increasingly complex. The CBN must balance inflation control with growth recovery, while the government faces pressure to rein in deficits and stimulate productivity.
Experts broadly agree that monetary tightening alone cannot carry the burden. Structural reforms in agriculture, energy, transportation and manufacturing are seen as critical to ensuring that liquidity translates into real economic expansion rather than inflationary pressure.
As the CEO of Economic Associates, Dr Ayo Teriba puts it: “Nigeria does not have a money problem; it has a productivity problem. Until output rises meaningfully, money supply growth will continue to feel like inflation rather than prosperity.”
Conclusion
The rise of Nigeria’s money supply to N122.9 trillion underscores both the resilience and fragility of the economy. While liquidity growth reflects renewed inflows and financial depth, it also exposes the limits of monetary tightening in an economy burdened by structural inefficiencies.
Whether the current policy mix leads to stability or stagnation will depfinish on how quickly Nigeria can align monetary discipline with fiscal restraint and productivitydriven reforms. For now, the liquidity tide continues to rise — testing the resolve of policycreaters and the patience of Nigerians.
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