Nigeria’s Money Supply Swells: A Look at the Post-Rate Cut Landscape (October 2025)

Nigeria’s broad money supply (M3) experienced a bump, reaching N119.04 trillion in October 2025. This represents a N1.25 trillion climb from September’s N117.78 trillion, according to Central Bank of Nigeria (CBN) data. It’s a 1.06% increase month-on-month. What does this upturn tell us about the health of the Nigerian economy following that September rate cut?

Year-on-year, M3 expanded by a notable 10.22%, rising from N107.99 trillion in October 2024. This sustained liquidity injection into the financial system is hard to ignore. This surge followed the Monetary Policy Committee’s (MPC) decision to trim the Monetary Policy Rate (MPR) by 50 basis points to 27% in September – their initial rate reduction since 2020. The rationale then centered on moderating inflation and improving FX dynamics.

Broad money supply, M3, serves as the most encompassing gauge of liquidity. It factors in narrow money, quasi money, and other liquid financial instruments held by the public. This October surge suggests a greater availability of cash, plus near-cash assets primed for spending, saving, and investing. Even as the CBN navigates a delicate path – relaxing policy while vigilantly guarding against reigniting inflationary pressures. I’ve seen this kind of balancing act before. The question is, can they pull it off?

Domestic Lending Takes Center Stage

The prime mover behind October’s M3 expansion? Net domestic assets (NDA). NDA leaped from N76.12 trillion in September to N84.23 trillion in October – a substantial N8.11 trillion leap. That’s a 10.65% spike in a single month, and one of the largest we’ve observed in 2025. This likely indicates a renewed influx of liquidity originating from within the domestic financial system.

NDA reflects the banking sector’s claims on both the government and the private sector, alongside other internal financial positions. Typically, such a significant upswing signals increased government borrowing, expanded credit lines to businesses and individuals, or banks rebalancing their portfolios towards domestic assets. It’s a complicated picture, and pinpointing the exact cause demands closer scrutiny.

What’s interesting is that this considerable expansion in NDA occurred even as net foreign assets (NFA) took a hit. NFA contracted sharply, declining from N41.66 trillion in September to N34.80 trillion in October – a N6.86 trillion or 16.45% month-on-month plunge.

Despite the monthly dip, NFA remains substantially higher compared to last year. It increased by N14.01 trillion, or 67.41%, from N20.79 trillion in October 2024 to N34.80 trillion in October 2025. Still, the recent monthly trend underscores potential external vulnerabilities, even as domestic components keep growing.

Given these factors, the MPC’s November decision to maintain the MPR at 27%, retaining its generally tight monetary stance, appears to be a strategic move. The goal? To curb the robust growth in NDA and M3, thus preventing any erosion of recent disinflation progress. It seems the CBN is prioritizing stability.

M2 and Narrow Money: Holding Steady

Money supply, when viewed as M2, also registered a modest uptick in October. M2 edged up from N117.77 trillion in September to N119.03 trillion in October, a N1.25 trillion or 1.06% increment. Looking at the year-on-year figures, M2 grew from N107.99 trillion in October 2024 to N119.03 trillion in October 2025, translating to a 10.22% surge.

M2 encompasses both narrow money and quasi money, including savings and term deposits. It gives insights into the most frequently used money balances for transactions and short-term financial choices. The tight correlation between M2 and M3 in October implies that the bulk of broad money expansion stemmed from standard deposit and credit routes, rather than more unconventional financial instruments.

Narrow money, or M1 (which includes currency in circulation and demand deposits), exhibited a more subdued movement. It grew from N39.11 trillion in September to N39.35 trillion in October, representing a N239.0 billion or 0.61% increase. Year-on-year, narrow money increased by N4.56 trillion, or 13.12%, from N34.78 trillion in October 2024.

These figures suggest that, while cash and current account balances are growing steadily, savings and term deposits within M2, coupled with the substantial rise in net domestic assets, are major contributors to money supply expansion. Overall, the October 2025 data reveals that domestic credit dynamics, rather than foreign asset accumulation, are currently shaping liquidity conditions. This is happening as the CBN cautiously eases its policies following the September rate cut, while holding firm on rates to manage inflation.

This shift towards domestic drivers of money supply merits attention. It arguably reflects a move toward greater self-reliance within the Nigerian financial system. The CBN’s challenge now lies in fine-tuning its policies to nurture sustainable growth without igniting inflationary pressures. This is the central question now, and Nigeria’s economic future hinges on it. To that end, all eyes remain on the CBN and its policy decisions in the coming months. Only time will tell if they have found the right formula.

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Keywords: Nigeria money supply, CBN rate cut, M3 increase, domestic lending, net domestic assets, inflation management, Nigerian economy, monetary policy