Nigeria’s Money Supply Hits Record N133tn Despite Tightening

Nigeria’s financial system continues to flood with cash despite explicit central bank efforts to mop up excess liquidity. Fresh Central Bank of Nigeria data reveals that money supply climbed three point one per cent to one hundred and thirty-three point two five trillion naira in June. The four trillion naira month-on-month surge occurred while monetary authorities kept the benchmark interest rate elevated at twenty-six point five per cent. High borrowing costs have failed to suppress overall liquidity expansion. Money growth continues to undermine official efforts to tame domestic inflation.

The rapid monetary expansion stems primarily from the growth of domestic assets and rising bank deposits. Net domestic assets surged by 4.3 per cent to clear 106 trillion naira within 30 days. Meanwhile, quasi-money—which includes savings and time deposits—expanded sharply to eighty-eight point five trillion naira. Businesses and households are stashing cash in interest-bearing accounts to exploit high yields. Commercial banks simultaneously recycle these huge deposits into expanding credit lines. Structural liquidity remains resilient against central bank rate hikes.

Physical cash usage presents a rare bright spot inside the domestic financial sector. Currency held outside formal banking channels dropped five per cent to four point nine trillion naira in June. The shift indicates that more transactions now pass directly through formal digital banking channels. Enhanced digital payment channels have successfully drawn cash back into commercial bank vaults. Yet keeping physical notes inside bank vaults does little to slow broad money expansion. Deposit creation continues to drive overall money supply growth.

Central bank officials find themselves caught in a difficult operational corner. Elevated interest rates aim to starve inflation by making credit expensive across commercial markets. Yet total money supply grew thirteen point five per cent year-on-year from June 2025 levels. High government fiscal deficits and continuous domestic credit expansion neutralize monetary tightening tools. Central bankers cannot control liquidity while state treasuries and corporate borrowers continue demanding fresh funds. Monetary policy transmission mechanisms remain structurally flawed.

Managing excess liquidity requires more than symbolic interest rate announcements in Abuja. The central bank must employ aggressive open market operations to absorb surplus cash from commercial balances. Fiscal authorities must simultaneously curb public sector deficit spending to align with monetary targets. Without structural coordination between treasury managers and central bankers, money supply will continue its rapid expansion. Nigerian consumers will pay the price through persistent commodity price inflation. Tight money exists only on paper.