In a clear sign of aggressive monetary tightening to start the year, Nigeria’s Central Bank (CBN) drained a massive N13.41 trillion from the financial system in January 2026 nearly five times the amount removed during the same month a year earlier.
This sharp liquidity squeeze, detailed in the latest Monetary and Credit Statistics released by the Financial Markets Dealers Association (FMDA), came as the apex bank worked to rein in excess cash following a late-2025 surge in currency circulation and to keep inflationary pressures in check.
The moves had a noticeable ripple effect across key indicators. Broad money supply (M3), which captures the total money floating in the economy including deposits and currency, dipped by 0.8% month-on-month, settling at N123.36 trillion from N124.41 trillion in December 2025. Narrow money (M2), the more liquid slice of the pie, followed a similar path, sliding to N123.35 trillion.
Private sector credit, a vital lifeline for businesses and households, also eased back by 0.8% to N75.24 trillion, while credit extended to the government edged down slightly by 0.1% to N34.19 trillion. Bank reserves took a harder hit, falling 5.5% to N30.26 trillion from N32.04 trillion, underscoring the direct impact of the CBN’s mop-up operations.
Breaking it down further, the data revealed contrasting trends in the banking system’s asset side. Net foreign assets (NFA) dropped sharply by 6.0% to N29.61 trillion, continuing a downward slide that saw them shrink from N41.66 trillion in September 2025. Meanwhile, net domestic assets (NDA) climbed 0.9% to N93.76 trillion, building on steady growth over the prior months and helping offset some of the external pressures.
The January contraction reversed the expansionary mood from December, when money supply had ballooned amid seasonal factors. Analysts view the CBN’s actions likely through heavy Open Market Operations (OMO), Treasury bill sales, and other sterilization tools as a deliberate effort to cool things down and support broader economic stability, especially against the backdrop of lingering inflation and forex market demands.
That said, the Monetary Policy Committee appeared to signal a possible easing of the tightening cycle later on. In late February, the MPC trimmed the benchmark interest rate from 27% to 26.5%, suggesting that the most intense phase of liquidity withdrawal might be behind us.
For now, January’s figures paint a picture of a central bank firmly in control mode: pulling levers hard to manage liquidity, safeguard the naira, and set the stage for more sustainable growth. Market watchers will be keen to see how these dynamics play out in the coming months, particularly as borrowing costs remain elevated and credit growth stays restrained.
