The Central Bank of Nigeria (CBN) withdrew a total of N13.41 trillion from Nigeria’s financial system in January 2026, marking a sharp increase compared to the N2.77 trillion absorbed during the same period in 2025.
The development is contained in the Monetary and Credit Statistics for January 2026 released by the Financial Markets Dealers Association (FMDA) and obtained by Nairametrics on Wednesday.
The data indicate a broad contraction in liquidity across the financial system, as key indicators such as broad money supply, bank reserves, and private sector credit all recorded month-on-month declines.
Analysts say the figures reflect an aggressive tightening stance by the apex bank at the beginning of the year as it sought to control inflationary pressures.
According to the report, total money supply in the economy, measured by Broad Money (M3), declined by 0.8 percent month-on-month to N123.36 trillion in January from N124.41 trillion recorded in December 2025.
Similarly, Narrow Money (M2), which represents more liquid forms of money that can be easily accessed and spent, also fell slightly to N123.35 trillion from N124.40 trillion in the previous month.
Private sector credit also moderated during the period, declining by 0.8 percent to N75.24 trillion in January, compared with N75.83 trillion recorded in December 2025. Credit to government dipped marginally by 0.1 percent to N34.19 trillion from N34.22 trillion during the same period.
READ ALSO: Naira slips to N1,359/$ after CBN’s 304th MPC cuts interest rate to 26.5%
Bank reserves experienced a more pronounced contraction, dropping by 5.5 percent to N30.26 trillion from N32.04 trillion, reflecting the direct effect of the liquidity mop-up operations carried out by the apex bank.
The January tightening followed an expansionary trend in December 2025, when currency in circulation surged significantly. The latest contraction highlights the CBN’s sterilisation strategy aimed at reducing excess liquidity in the banking system and stabilising prices.
However, recent policy signals suggest that the peak of the tightening cycle may have been reached. On February 24, the Monetary Policy Committee (MPC) of the CBN reduced the benchmark Monetary Policy Rate (MPR) from 27 percent to 26.5 percent, indicating a possible shift toward gradual monetary easing.
Further breakdown of the monetary aggregates revealed contrasting movements between foreign and domestic assets within the banking system.
Net Foreign Assets (NFA) declined by 6 percent to N29.61 trillion in January, down from N31.51 trillion recorded in December. Over a six-month period, NFA fell sharply from N41.66 trillion in September 2025 to the current level, reflecting sustained pressure on external balances.
In contrast, Net Domestic Assets (NDA) continued to grow, rising by 0.9 percent to N93.76 trillion from N92.90 trillion in December 2025. Over the same six-month period, NDA increased steadily from N76.12 trillion recorded in September 2025.
The report also showed that Currency Outside Banks (COB) declined by 3.7 percent to N5.21 trillion in January from N5.41 trillion in December. Currency in circulation, however, remained largely stable at N5.73 trillion, suggesting tighter liquidity conditions in the interbank market.
Throughout most of 2025, the CBN maintained a strong monetary tightening posture, deploying Open Market Operations and issuing Treasury Bills to absorb excess liquidity in the financial system.
The January 2026 data therefore signal a firm tightening phase marked by substantial liquidity sterilisation and reduced money supply. Analysts believe the subsequent interest rate cut by the CBN could mark the beginning of a gradual easing cycle.
Market observers expect improved liquidity conditions and lower policy rates to begin influencing credit growth and lending activities in the banking sector from March onward.