Victor EzejaWhile the consecutive drop in Nigeria’s money supply in 2025 is believed to have a link with in decline in the inflation rate, economic experts have warned that it poses significant risks to the country’s economic growth.
The Central Bank of Nigeria (CBN) data reveal that the country’s broad money supply has declined for the third consecutive month this year.
Join our WhatsApp ChannelThe recent Money and Credit Statistics data published by the CBN show that Nigeria’s money supply (M2) declined to N117.5 trillion in June 2025, marking a 1.2 percent month-on-month (MoM) drop from N118.9 trillion in May 2025.
It was first recorded in February when it dropped to N110.32 trillion from N110.94 trillion in January, and also fell to N119.29 trillion in April, and N119.005 trillion in May 2025.
Speaking in an interview with Prime Business Africa, Dr Ebikabowei Aduku, a development economist and lecturer at the University of Africa, Toru-Orua, Bayelsa State said the consecutive drop in money supply could impact negatively on economic growth rate.
While noting that the drop in money supply could lead to an increase in savings, Dr Aduku expressed doubt that such would be the case in reality, given the level of economic hardship faced by the citizens due to persisting high inflation in the country. Although the country has recorded a drop in inflation in recent months, the current figure of 22.22 per cent is still perceive to be high with the people’s consumption power having been significantly eroded.
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In its quest to rein in inflation, the CBN has aggressively tightened monetary policy, raising the Monetary Policy Rate (MPR) by 875 basis points to 27.5 per cent in 2024 and maintaining it through the first half of 2025.
The Cash Reserve Ratio (CRR) stands at 45 per cent, one of the highest globally, effectively sterilizing a large portion of bank deposits and reducing loanable funds. This restricts credit availability for businesses and households, stifling investment and consumption.
Aduku pointed out that the policy measure has led to stagnation of private sector credit growth, exacerbating challenges for Nigeria’s manufacturing sector, which contributes less to GDP. Reduced lending hampers productivity and expansion in key sectors, he added.
“I don’t see the drop in money supply having a meaningful impact on the manufacturing and services sectors in Nigeria. These sectors are dominated by micro and small businesses,” Aduku stated. “A large percentage of these businesses do not have access to government financing. Their sources of financing are mostly informal.
“The drop in money supply may not make much difference in terms of the manufacturing sector activities and the services sector performances. “
“If the drop in money supply would have any significant impact, it would most likely reduce the economic growth rate.”
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Reflecting on the money supply figure between 2014 and 2025, the economic expert noted that it has recorded a significant surge over a decade.
According to CBN’s economic report, quasi money stood at N10.5 trillion in the 4th quarter of 2014, reflecting a 639 per cent increase in 11 years when compared to N77.6 trillion recorded in June 2025.
Aduku highlighted the negative impact of the persistent increase in money supply over the years. He said there has been a continuous increase in prices due to the availability of more money for spending in the financial system, leading to an increase in demand over supply, as productivity has remained low.
“The current high prices we are suffering in 2025 did not just start today. It’s an accumulation of the increase in prices since 2014 or before 2014 now. So this effect we are having in the economy is not something that just started today. It’s a result of the persistent increase in money supply over the years.
“Money supply has really gone too high. So this little drop will not make meaningful changes in the economy,” he added.
Aduku stated that with the realities on ground, monetary policy alone may not suffice to curb inflation without addressing supply-side constraints such as, insecurity in farming regions, fuel shortages.
Growth Sacrificed for Stability
The CBN’s focus on exchange rate stability and inflation control has come at the cost of growth. The World Bank projected Nigeria’s GDP growth to grow at 3.6 per cent in 2025, below pre-pandemic levels, with risks tilted downward due to tight liquidity.
Analysts have warned that high CRR and MPR could derail Nigeria’s $1 trillion GDP target by 2030 unless complemented by fiscal reforms.
On the potential remedies, some analysts have suggested gradual reduction of CRR to free up liquidity without triggering inflation, given improved FX reserves; targeted fiscal interventions by addressing food insecurity, energy costs, and infrastructure gaps to reduce reliance on monetary tool and enhancing credit channels to productive sectors like agriculture and SMEs.
Victor Ezeja is a passionate journalist with seven years of experience writing on economy, politics and energy. He holds a Master's degree in Mass Communication.
