Nigeria’s broad money supply hit N138.78 trillion in July 2026, marking a 16% rise from the previous year despite ongoing efforts by the Central Bank of Nigeria (CBN) to tighten monetary conditions. The apex bank reported that the M3 aggregate, which includes currency outside banks, demand deposits, savings and time deposits, and foreign-currency deposits, expanded by N5.52 trillion from the previous month. This growth highlights a disconnect between liquidity management tools and the actual expansion of credit within the financial system.
Policy vs. Reality
The CBN has maintained a restrictive stance, keeping its benchmark interest rate at 26.5%. Officials have used open market operations (OMO) to drain excess liquidity, such as the N4.72 trillion withdrawn over two days in late August. The document notes that despite these substantial interventions, the banking system still held significant excess liquidity. This suggests that while the central bank is attempting to cool down the economy, the velocity and volume of money circulating through the system continue to climb.
Money supply expansion does not automatically mean cheap credit. The relationship between the quantity of money and the cost of borrowing depends on factors like lending standards, risk assessments, and demand. Even with a large pool of funds available, banks may still restrict lending if they perceive high risks. Consequently, the reported increase in broad money does not necessarily translate to easier access to loans for households and businesses. Policymakers face a difficult task of managing inflation without choking off productive economic activity.
CBN officials frequently emphasize that the banking sector has ample liquidity reserves. They argue that the problem lies not in the availability of funds, but in the willingness of banks to lend to riskier sectors. This perspective suggests that credit tightening is a deliberate strategy to improve asset quality rather than a failure of monetary policy. However, critics argue that this approach stifles growth and ignores the needs of small businesses.
Impact on Housing Finance
The housing market remains particularly vulnerable to these monetary trends. Residential development relies heavily on access to affordable finance, but raised interest rates increase the cost of mortgages and construction loans. For developers, high borrowing costs can make projects difficult to structure, potentially leading to smaller developments or delayed timelines. Prospective homeowners also face higher monthly repayments, which reduces their purchasing power and can slow down the market.
While lower interest rates would theoretically support housing finance, the market faces structural challenges beyond just the cost of money. Land costs, construction materials, infrastructure deficits, and planning regulations also influence affordability. Without improvements in these areas, simply easing monetary policy may not resolve the housing supply crisis. Investors will need to monitor inflation and exchange rates closely, as a sustained decline in inflation could eventually create room for rate cuts, but premature easing risks triggering renewed inflationary pressures. To address these underlying issues, some industry voices call for stronger standards and more affordable materials, such as cement. Cheaper cement could significantly lower construction costs, making housing more accessible.
