Nigeria’s broad money supply expanded to N138.78 trillion in July 2026, despite the Central Bank of Nigeria (CBN) maintaining a tight monetary policy stance aimed at controlling inflation and managing liquidity.
The latest monetary statistics from the CBN show that the M3 money supply rose by 16% year-on-year, from N119.89 trillion recorded in July 202
On a month-on-month basis, money supply increased by N5.52 trillion, or 4.14%, from N133.25 trillion in June.
Broad money, or M3, covers currency outside banks, demand deposits, savings and time deposits, as well as foreign-currency deposits.
Foreign assets drive expansion
The July increase was accompanied by a significant rise in the banking system’s net foreign assets.
CBN data showed that net foreign assets climbed from N26.53 trillion in June to N37.71 trillion in July, representing an increase of N11.18 trillion, or about 42.15%.
The increase in foreign assets more than offset a contraction in net domestic credit, which fell from N106.73 trillion to N101.07 trillion during the same period.
Net domestic credit consequently declined by about N5.66 trillion, representing a 5.30% monthly reduction.
Meanwhile, M2 money supply also expanded, reaching N138.77 trillion in July, compared with N133.24 trillion in June.
The sustained increase means broad money has risen steadily during 2026, moving from N123.95 trillion in January to N138.78 trillion by July.
CBN maintains restrictive policy
The expansion occurred despite the CBN’s continued efforts to tighten financial conditions.
At its July 2026 Monetary Policy Committee meeting, the apex bank unanimously retained the Monetary Policy Rate (MPR) at 26.5%, maintaining its restrictive stance as it seeks to consolidate the downward trend in inflation and preserve macroeconomic stability.
The development highlights the complexity of monetary management, as liquidity can expand through changes in foreign assets and other monetary channels even while the central bank uses policy instruments to restrain excess liquidity.
Earlier in the year, the CBN withdrew N13.41 trillion from the financial system in January alone, reflecting its aggressive liquidity-management approach.
The apex bank has also continued to rely on open market operations and Treasury bill sales to influence liquidity conditions in the banking system.
Implications for inflation and the economy
The increase in money supply could have implications for inflation, although a rise in liquidity does not automatically translate into higher consumer prices.
Its effect depends on factors such as the pace of economic growth, credit expansion, demand for goods and services and the velocity at which money circulates.
Nigeria’s economy grew by 4.43% in real terms in the second quarter of 2026, according to the National Bureau of Statistics, suggesting that part of the additional liquidity could be supporting economic activity.
However, sustained growth in money supply could create additional inflationary pressure if liquidity expands faster than the economy’s capacity to produce goods and services.
For the CBN, the challenge will therefore be to balance liquidity management with the need to support economic expansion while preserving the gains recorded in the fight against inflation.
The July figures also underscore the changing composition of Nigeria’s monetary aggregates, with stronger external assets playing a major role in the latest expansion even as domestic credit contracted.
Nairametrics
