This study examined the effect of money supply on private sector credit in Nigeria using time-series data obtained from the Central Bank of Nigeria covering the period from 1990 to 2024. Private sector credit served as the dependent variable, while narrow money supply (M1), broad money supply (M2), and broad money supply (M3) constituted the explanatory variables. To examine both the short- and long-run dynamics between money supply and private sector credit, the study employed unit root testing, cointegration analysis, the Granger causality test, descriptive statistics, correlation analysis, Dynamic Least Squares (DLS), and Fully Modified Least Squares (FMOLS). The DLS results indicated that money supply variables accounted for 55% and 51.9% of the variation in private sector credit. Specifically, M1 and M2 exerted negative effects on private sector credit, whereas M3 had a positive effect. The FMOLS estimates showed that 53.3% and 52.6% of the variation in private sector credit was associated with the money supply variables, with M1 and M3 exerting positive effects and M2 showing a negative effect. The study concluded that money supply plays an important role in determining private sector credit in Nigeria. Accordingly, it recommends that the Central Bank of Nigeria should sustain and strengthen policies aimed at expanding credit to the private sector. Monetary policy should also adopt a broader framework capable of influencing private sector credit and government expenditure as components of aggregate demand, while improving the effectiveness of monetary management through better organization of financial markets to strengthen the transmission effects of monetary policy variables, particularly broad money supply, on private sector credit.

Keywords: Money Supply, Private Sector Credit, Narrow Money Supply, Broad Money Supply, Broad Money Supply.