Nigeria's monetary reserves decline to 117 trillion Naira in June 2025
Nigeria's Money Supply and Foreign Assets Decline in June 2025
The Central Bank of Nigeria (CBN) has released data showing a decline in the country's money supply and foreign assets for the month of June 2025.
The net foreign assets of the CBN dropped to N40.7 trillion in June from N45.8 trillion in May, indicating a weakening of Nigeria's external asset position. However, it is worth noting that there are no publicly available data on the size of the foreign assets of the CBN for any specific month in 2025.
The decline in M1, which represents the most liquid component of the money supply, suggests reduced cash availability. This could be due to a variety of factors such as reduced government spending, higher interest rates, or seasonal shifts in liquidity demand. The broad money supply (M2) also declined, falling to N117.4 trillion in June from N118.9 trillion in May.
Despite the contraction in both foreign and domestic assets, the broad money supply showed a 15.81% year-on-year increase, having risen from N101.4 trillion in June 2024. This increase partially offset the fall in external assets and prevented a steeper decline in total money supply.
The narrow money (M1) fell to N39.9 trillion in June 2025 from N40.4 trillion in May. The June decline in money supply, particularly in the most liquid components like M1, points to early success in efforts to reduce excess liquidity and tame inflationary pressures.
On the other hand, net domestic assets rose to N76.8 trillion in June 2025 from N73.2 trillion in May. The increase in domestic assets may suggest that domestic liquidity driven by bank credit, government borrowing, and CBN's net claims may have tightened.
The CBN's recent monetary tightening including the high Monetary Policy Rate (MPR) and more aggressive use of Open Market Operations (OMO) is starting to be reflected in the data. The contraction in net foreign assets and the increase in domestic assets could be a result of these measures.
However, it is important to note that the data does not provide specific details on the causes of the changes in the money supply and foreign assets. Further investigation and analysis would be required to fully understand the factors at play.
Since February, intermittent drops have signaled tighter liquidity conditions in the economy. The first decline of 2025 was recorded in February, with the broad money supply falling to N110.32 trillion. The June decline represents a 1.27% drop from May 2025, where the broad money supply was N119 trillion.
In conclusion, the data released by the CBN indicates a decline in both the money supply and foreign assets for the month of June 2025. While this suggests tighter liquidity conditions in the economy, the broad money supply still shows a significant year-on-year increase. The causes of these changes and their implications for the Nigerian economy require further analysis.
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