Bismarck Rewane, managing director and CEO of Financial Derivatives Company Limited, said Nigeria's money supply is likely to rise in the coming months as higher crude oil prices increase government revenue and federal allocations. Federation Account Allocation Committee disbursements rose by 7.94 percent in March to N2.04 trillion, and monthly allocations could stay above N2 trillion if oil prices remain high amid ongoing geopolitical tensions. This surge in statutory allocations and oil-related income is expected to inject more liquidity into the economy at a time when inflation is already accelerating.
Rewane projected inflation would climb to 16 percent in April from 15.38 percent in March, reversing recent moderation due to the pass-through effect of petrol prices, which have increased by over 50 percent. This has driven up food prices and placed additional strain on household spending. The Central Bank of Nigeria is expected to keep its benchmark interest rate unchanged at 26.5 percent during its Monetary Policy Committee meeting on April 19 and 20. Instead of adjusting rates, the CBN may rely on liquidity management tools such as Open Market Operations and the Cash Reserve Ratio to absorb excess funds.
The CBN had cut its benchmark rate by 50 basis points in February 2026 as inflation showed signs of slowing. It also adjusted the asymmetric corridor around the Monetary Policy Rate to +50/-450 basis points to discourage banks from holding idle reserves. The Cash Reserve Ratio remained at 45 percent for commercial banks and 16 percent for merchant banks, while the liquidity ratio was held at 30 percent. Rewane said the MPC is likely to maintain the status quo on the MPR but could raise the CRR if money supply becomes overly saturated. He warned that increased FAAC inflows offer only temporary fiscal relief, given Nigeria's vulnerability to global oil price swings.
Bismarck Rewane highlights a contradiction: rising oil revenues boost government spending but undermine the CBN's inflation control efforts. The injection of over N2 trillion into the economy risks eroding gains from previous rate cuts meant to stabilise prices. While state and local governments may see short-term fiscal relief, households face higher costs from inflation driven by fuel and food. This dynamic leaves the central bank reliant on technical tools rather than rate changes to manage an increasingly volatile economic balance.
Editorial note: AI-assisted opinion, not established fact. Full disclaimer →
