Nigeria’s {financial} 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 overseas trade dangers.
The event is predicated on CBN {financial} market knowledge and insights from market operators monitoring liquidity circumstances and glued revenue 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 adverse of N2.4 trillion, an enchancment from the N2.9 trillion deficit recorded in December 2025. Nonetheless, this masked the magnitude of liquidity withdrawn by means of aggressive Open Market Operations (OMO), major market issuances, and banks’ deposits with the apex {bank}.
CBN knowledge present that January’s liquidity squeeze was pushed primarily by large-scale sterilisation actions.
The information spotlight how a number of coverage instruments have been deployed concurrently to empty money from the banking system.
These outflows have been solely partially offset by inflows from OMO maturities, treasury repayments, and restricted borrowing by way of the Standing Lending Facility (SLF), leaving the banking system considerably cash-starved by month-end.
Market analysts say the January end result displays a deliberate coverage alternative 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 dimensions of OMO exercise suggests the {bank} will not be able to loosen up, particularly with election-related FX dangers already on the horizon,” stated Ayodele Akinwunmi, Head of Analysis at FSDH Merchant Bank.
“The T-bills market pattern exhibits that traders imagine 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,” stated 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 when it comes to rates of interest, which ultimately trickles all the way down to companies and households, the key goal is stability and inflation concentrating on,” stated Mr. Tilewa Adebajo, Chief Govt 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.
Interbank charges surged in response to the tightening circumstances.
The Open Purchase Again (OBB) price and In a single day price each climbed above 26 %, underscoring sustained funding stress 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, whilst short-term dangers stay elevated.
The sustained liquidity squeeze has wide-ranging implications for {financial} markets and the broader financial system.
Tighter circumstances reshape incentives for banks, traders, and policymakers alike.
The coverage trade-off highlights the tough steadiness between stabilisation and development in Nigeria’s present macroeconomic atmosphere.
January 2026 marked some of the 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 outdoors banking system.
Regardless of the heavy money drain, traders maintained sturdy demand for longer-dated authorities securities, signalling continued confidence in yields whilst financial circumstances stay tight.
