Nigeria’s money supply (M₂) contracted by 1.58 per cent month-on-month to N117.8 trillion in September 2025, from N119.7 trillion in August, as banks’ credit to the economy declined sharply amid the Central Bank of Nigeria’s (CBN) sustained monetary tightening.

The decline, reflected across key components of money supply except currency outside banks, highlighted the liquidity squeeze triggered by the apex bank’s aggressive policy stance aimed at curbing inflation.

This was contained in the Central Bank of Nigeria’s (CBN) latest Money and Credit Statistics report.

The decline was largely driven by a five per cent contraction in banks’ credit to the economy, reflecting the impact of the apex bank’s sustained monetary tightening to curb inflation and mop up excess liquidity.

Breakdown of the data showed that Quasi Money fell by 1.99 per cent to N78.7 trillion from N80.3 trillion, while Narrow Money (M₁) declined by 0.76 per cent to N39.1 trillion from N39.4 trillion.

Similarly, Demand Deposits dipped 0.86 per cent to N34.6 trillion, compared with N34.9 trillion in August.

However, Currency Outside Banks (CoB) inched up slightly by 0.45 per cent, reaching N4.47 trillion from N4.45 trillion in the previous month.
On the credit side, aggregate credit to the economy fell by 2.1 per cent to N96.7 trillion from N98.8 trillion, driven by a 4.4 per cent decline in credit to the private sector, which dropped to N72.5 trillion from N75.9 trillion.

This offset a 5.67 per cent increase in lending to the government, which rose to N24.2 trillion from N22.9 trillion.

An investment banker, Tolulope Alayande, said the contraction underscores the impact of the CBN’s aggressive policy stance, which has seen the Monetary Policy Rate (MPR) raised by over 800 basis points since mid-2023 to rein in inflation that remains elevated despite tightening measures.

“What we are now seeing is the offshoot of the CBN’s recent policy shift. More of this will happen as inflation begins to recede.”