Nigeria’s {financial} markets entered 2026 below intense strain 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 overseas trade dangers.
The event relies on CBN {financial} market information and insights from market operators monitoring liquidity circumstances and stuck earnings exercise.
Whereas headline system liquidity improved barely in contrast with December, analysts say the dimensions 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 internet unfavorable of N2.4 trillion, an enchancment from the N2.9 trillion deficit recorded in December 2025. Nevertheless, this masked the magnitude of liquidity withdrawn via aggressive Open Market Operations (OMO), main market issuances, and banks’ deposits with the apex {bank}.
CBN information present that January’s liquidity squeeze was pushed primarily by large-scale sterilisation actions.
The information spotlight how a number of coverage instruments had been deployed concurrently to empty money from the banking system.
These outflows had 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.
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 dimensions 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 size of OMO exercise suggests the {bank} isn’t 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 strain and preserve 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 key goal is stability and inflation concentrating on,” mentioned Mr. Tilewa Adebajo, Chief Govt Officer of CFG Advisory.
The instant influence of the liquidity crunch was evident within the cash market, the place funding stress intensified as banks scrambled for money.
Interbank charges surged in response to the tightening circumstances.
The Open Purchase Again (OBB) fee and In a single day fee each climbed above 26 %, underscoring sustained funding strain throughout the banking system.
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 overseas trade market.
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.
Portfolio managers seem like positioning to lock in present yields forward of any potential easing later within the cycle, at the same time as short-term dangers stay elevated.
The sustained liquidity squeeze has wide-ranging implications for {financial} markets and the broader economic system.
Tighter circumstances reshape incentives for banks, buyers, and policymakers alike.
The coverage trade-off highlights the tough steadiness between stabilisation and development in Nigeria’s present macroeconomic surroundings.
January 2026 marked one of the crucial aggressive liquidity mop-up phases by the CBN in current months.
The actions had been taken towards the backdrop of extra cash provide, a sharp enhance in money exterior banking system.
Regardless of the heavy money drain, buyers maintained sturdy demand for longer-dated authorities securities, signalling continued confidence in yields at the same time as financial circumstances stay tight.
