Nigeria's Money Supply Hits N133.25T Amid 26.5% Interest Rate
Nigeria’s broad money supply surged despite a restrictive 26.5% benchmark rate, signaling persistent liquidity expansion that challenges the central bank's inflation-fighting credibility.
Nigeria’s broad money supply increased to N133.25 trillion in June, rising by N4.04 trillion from the previous month. The 3.11% month-on-month expansion occurred even as the Central Bank of Nigeria held its benchmark interest rate steady at a restrictive 26.5%. The latest money and credit statistics, published on Wednesday, show annual growth of 13.59% compared to June 2025.
The primary engine behind this liquidity growth was a 4.37% increase in net domestic assets, which reached N106.73 trillion. Conversely, net foreign assets contracted by 1.56% to N26.53 trillion, and currency held outside banks fell to N4.92 trillion. This dynamic indicates that domestic credit creation, rather than external inflows or cash hoarding, is driving the balance sheet expansion.
A closer look at the components reveals that quasi-money climbed to N88.54 trillion from N84.58 trillion. Demand deposits saw a more modest uptick to N39.78 trillion. The shift toward time-based and savings deposits suggests entities are parking funds rather than spending, which may temporarily dampen the immediate inflationary impact of the expanding money supply.
For market participants, the disconnect between aggressive monetary tightening and accelerating money supply growth raises questions about policy transmission. At its May 2026 meeting, the CBN unanimously voted to maintain the 26.5% rate to sustain disinflation, following a cautious hold at 27% in November 2025. However, if domestic asset expansion continues to outpace the central bank's restrictive posture, those inflation-fighting efforts could ultimately be undermined.
The central bank is explicitly attempting to balance liquidity management with its mandate to moderate inflation and preserve macroeconomic stability. For investors, the sustained growth in net domestic assets may signal underlying fiscal dynamics that bypass traditional monetary constraints. Until the broad money supply trajectory aligns with the high benchmark rate, the risk of renewed price pressures remains a critical variable for Nigerian financial markets.
