The total amount of naira circulating within the Nigerian economy has witnessed a notable decrease, settling at N5 trillion by the end of March 2025. This figure, released in the latest money and credit statistics by the Central Bank of Nigeria (CBN), marks a further decline from the N5.04 trillion recorded in February and N5.24 trillion in January of the same year.
Naira in circulation represents the physical currency readily available for everyday transactions, investments, and savings within the nation’s financial system. According to financial analysts, this contraction could be a deliberate move by the CBN as part of broader strategies aimed at mitigating persistent inflationary pressures and fostering greater economic stability.
“A reduction in the volume of currency in circulation is often a tool employed by central banks to manage liquidity within the system,” explained Dr. Aisha Mohammed, a seasoned economist and financial consultant based in Lagos. “By tightening the supply of money, the CBN aims to curb excessive spending and ultimately dampen inflation.”
Interestingly, while the amount of naira in the hands of the public has decreased, the CBN’s bank reserves have shown a positive trajectory. These reserves, crucial for ensuring liquidity and overall financial stability within the banking sector, climbed to N28.52 billion in March 2025. This represents an increase from N27.57 billion in February and N27.43 billion in January. The consistent growth in bank reserves suggests a proactive stance by the apex bank in bolstering the financial security of the nation’s banking system.
However, the special intervention reserves maintained a steady figure of N284.36 million throughout the three-month period, indicating a consistent allocation towards specific economic support initiatives.
Read Also: Nigeria’s Money Supply Hits Record High Despite CBN’s Tightening Grip
A look at the corresponding period last year reveals a contrasting trend. In March 2024, the value of Nigeria’s currency in circulation stood at N3.87 trillion, marking a significant year-on-year increase. Furthermore, currency outside banks also experienced growth during the first quarter of 2024, reaching N3.63 trillion in March.
Adding another layer to the current economic landscape, recent CBN data indicates that Nigeria’s broad money supply (M2) experienced its first dip in 2025, falling to N110.32 trillion in February from N110.94 trillion in January. This 0.56 percent month-on-month decrease underscores the apex bank’s ongoing commitment to actively manage liquidity within the financial system, particularly in the wake of earlier monetary tightening measures and adjustments in the foreign exchange market.
The interplay between the decreasing naira in circulation and the increasing bank reserves paints a complex picture of the CBN’s efforts to navigate Nigeria’s economic challenges. While a reduction in currency in circulation can help to tame inflation, it also has implications for the ease of transactions and overall economic activity.
The coming months will be crucial in observing the sustained impact of these monetary policies on inflation, economic growth, and the daily lives of Nigerians. The CBN’s continued monitoring and strategic adjustments will be key in ensuring a balanced and resilient financial ecosystem.
