Oil-driven FX inflows swell Nigeria's money supply as businesses hold back borrowing

The VP's media aide further noted thus, "for context, the vice president's point was that the naira exchange rate benefits only those who can obtain the dollar at N410/$1, some of who simply turn round to sell to the parallel market at N570/$1.

Nigeria’s money supply expanded sharply in May 2026, supported by stronger foreign currency inflows, but businesses remained cautious about taking on new debt despite recent interest rate cuts by the Central Bank of Nigeria (CBN).

Analysis of the CBN’s Monetary and Credit Statistics for May 2026 by Financial Markets Dealers Association (FMDA) showed that broad money supply (M3) increased by 3.38 percent month-on-month to N129.21 trillion in May from N124.99 trillion in April.

Similarly, money supply (M2) rose by 3.38 percent to N129.20 trillion from N124.98 trillion in the previous month.

The increase was largely driven by a significant rise in Net Foreign Assets (NFA), which grew by 12.23 percent to N26.95 trillion in May from N24.01 trillion in April, indicating stronger foreign currency inflows into the economy.

According to FMDA’s analysis, the improvement in NFA suggests that Nigeria’s earnings from external engagements strengthened during the month. The association noted that the increase may have been supported by higher crude oil export receipts amid elevated oil prices during the United States-Iran conflict, alongside other autonomous foreign exchange inflows into the economy.

Net Domestic Assets (NDA) also increased, rising by 1.28 percent to N102.26 trillion from N100.97 trillion in April, contributing to overall liquidity growth within the financial system.

Despite the increase in liquidity and improved foreign exchange inflows, lending to the private sector remained subdued.

Private sector credit rose by only 0.57 percent to N81.04 trillion in May, suggesting that businesses remained cautious about expanding borrowing activities even after the CBN’s monetary easing measures earlier in the year.

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The modest growth in credit comes despite expectations that lower interest rates would encourage businesses and households to increase borrowing.

The CBN had reduced the Monetary Policy Rate (MPR) in late February 2026 as part of efforts to ease monetary conditions and support economic activity. However, FMDA’s analysis suggests that borrowing decisions continue to be influenced by factors beyond interest rates.

According to the association, global uncertainties have continued to weigh on business confidence. The disruption of key international shipping routes during the United States-Iran conflict increased freight costs and raised production expenses for manufacturers.

Rising input costs, supply chain disruptions and uncertainty over future demand may have encouraged many firms to postpone expansion plans and delay new borrowing commitments despite the gradual easing of monetary policy.

The data also showed continued growth in government borrowing. Credit to government increased by 1.97 percent to N40.38 trillion, reflecting sustained public sector demand for financing.

Meanwhile, currency outside banks rose by 2.15 percent to N5.19 trillion from N5.08 trillion in April, while currency in circulation increased by 0.77 percent to N5.69 trillion from N5.65 trillion.

At the same time, bank reserves declined by 2.43 percent to N33.76 trillion from N34.60 trillion, while base money fell by 1.98 percent to N39.45 trillion from N40.25 trillion recorded in April.

The May data indicate that stronger foreign exchange inflows are helping to boost liquidity across the economy. However, the weak response of private sector credit suggests that businesses remain focused on managing risks and preserving cash amid lingering global and domestic uncertainties, limiting the transmission of lower interest rates into stronger borrowing and investment activity.

Hope Moses-Ashike

Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.