Nigeria’s monetary markets entered 2026 underneath intense stress because the Central Bank of Nigeria (CBN) withdrew greater than N15 trillion from the banking system in January, reinforcing its tight financial stance amid persistent inflation and international trade dangers.
The event is predicated on CBN monetary market information and insights from market operators monitoring liquidity circumstances and stuck revenue exercise.
Whereas headline system liquidity improved barely in contrast with December, analysts say the size of money sterilisation alerts that borrowing prices will stay elevated and funding methods cautious within the close to time period.
Common system liquidity closed January at a web damaging of N2.4 trillion, an enchancment from the N2.9 trillion deficit recorded in December 2025. Nonetheless, this masked the magnitude of liquidity withdrawn via aggressive Open Market Operations (OMO), main market issuances, and banks’ deposits with the apex bank.
What the information is saying
CBN information present that January’s liquidity squeeze was pushed primarily by large-scale sterilisation actions.
The info spotlight how a number of coverage instruments have been deployed concurrently to empty money from the banking system.
- N8.5 trillion in OMO gross sales through the month
- N2.9 trillion positioned by banks on the Standing Deposit Facility (SDF)
- N3.7 trillion raised via main market treasury issuances
These outflows have been solely partially offset by inflows from OMO maturities, treasury repayments, and restricted borrowing through the Standing Lending Facility (SLF), leaving the banking system considerably cash-starved by month-end.
Knowledgeable views
Market analysts say the January final result displays a deliberate coverage selection by the CBN to prioritise macroeconomic stability over liquidity consolation.
They argue that the size and persistence of tightening counsel restricted prospects for near-term easing.
“What January confirmed clearly is that the CBN is prioritising macro stability over liquidity consolation. The dimensions of OMO exercise suggests the bank will not be able to loosen up, particularly with election-related FX dangers already on the horizon,” mentioned Ayodele Akinwunmi, Head of Analysis at FSDH Merchant Bank.
“The T-bills market development reveals that buyers consider charges are close to the height, and are aggressively taking benefit. However they aren’t assured sufficient to guess aggressively on near-term easing. They’re betting on longer maturity, however with warning,” mentioned Mr. Blakey Ijezie, founding father of Okwudili Ijezie & Co.
“The aggressive use of OMO tightens home liquidity, and CBN’s main goal is to rein-in inflationary stress and keep system stability. Although it raises funding prices by way of rates of interest, which ultimately trickles all the way down to companies and households, the most important goal is stability and inflation concentrating on,” mentioned Mr. Tilewa Adebajo, Chief Government Officer of CFG Advisory.
The speedy impression of the liquidity crunch was evident within the cash market, the place funding stress intensified as banks scrambled for money.
Extra insights
Interbank charges surged in response to the tightening circumstances.
The Open Purchase Again (OBB) charge and In a single day charge each climbed above 26 %, underscoring sustained funding stress throughout the banking system.
- The CBN performed two Nigerian Treasury Payments (NTB) auctions in January, providing N2.4 trillion throughout 91-day, 182-day, and 364-day tenors.
- Complete bids reached N4.9 trillion, greater than double the quantity provided, regardless of tight system liquidity.
- Buyers confirmed a robust choice for 364-day payments, whereas shorter tenors recorded weaker demand.
- Common NTB yields rose by 60 foundation factors to 18.5 %, with short- and mid-tenor payments experiencing the heaviest selloffs.
OMO operations remained central to the CBN’s coverage toolkit, with the N8.5 trillion withdrawal underscoring the apex bank’s intent to curb extra naira liquidity and defend the international trade market.
Bonds present cautious optimism
Exercise within the bond market mirrored a extra measured response to the tightening cycle.
The Debt Administration Workplace (DMO) reopened three Federal Authorities of Nigeria bonds—February 2031, February 2034, and January 2035—providing a complete of N900 billion.
- Complete subscriptions exceeded the provide by 2.5 instances, indicating robust investor urge for food.
- The January 2035 bond attracted the best demand, pointing to rising curiosity in long-dated securities.
- Common bond yields edged barely decrease to 16.5 %.
- Quick- and mid-term yields compressed, whereas long-dated bonds noticed modest upward motion.
Portfolio managers seem like positioning to lock in present yields forward of any potential easing later within the cycle, whilst short-term dangers stay elevated.
Why this issues
The sustained liquidity squeeze has wide-ranging implications for monetary markets and the broader financial system.
Tighter circumstances reshape incentives for banks, buyers, and policymakers alike.
- Banks face larger funding prices, tighter credit score circumstances, and stress on margins.
- Buyers proceed to favour fixed-income devices, significantly long-dated treasury payments and bonds, as excessive yields compete strongly with equities.
- For the financial system, elevated borrowing prices could weigh on development, however the CBN is prioritising inflation management and international trade stability over short-term enlargement.
The coverage trade-off highlights the tough steadiness between stabilisation and development in Nigeria’s present macroeconomic surroundings.
What it is best to know
January 2026 marked probably the most aggressive liquidity mop-up phases by the CBN in latest months.
The actions have been taken towards the backdrop of extra cash provide, a sharp enhance in money exterior banking system.
- The CBN intensified the sale of treasury payments and OMO devices to soak up extra naira liquidity held by banks.
- This strategy displays the apex bank’s broader tightening stance aimed toward curbing inflation and managing trade charge pressures.
- The coverage straight influences how a lot cash circulates within the banking system and at what price.
Regardless of the heavy money drain, buyers maintained robust demand for longer-dated authorities securities, signalling continued confidence in yields whilst financial circumstances stay tight.
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