Nigeria’s financial markets entered 2026 under sustained pressure after the Central Bank of Nigeria (CBN) withdrew more than N15 trillion from the banking system in January, reinforcing its tight monetary stance amid persistent inflationary pressures and ongoing foreign exchange risks.
Financial market data from the apex bank and insights from market operators show that the aggressive liquidity sterilisation was achieved through a combination of Open Market Operations (OMO), treasury bill issuances, and increased deposits by banks with the CBN.
Analysts say the scale of the intervention signals that borrowing costs are likely to remain elevated, with little room for near-term policy easing.
Although headline system liquidity showed a marginal improvement from December, the underlying picture remained one of severe cash tightness. Average system liquidity closed January at a net negative position of N2.4 trillion, compared with a N2.9 trillion deficit in December 2025.
Market watchers note that this improvement masked the magnitude of cash drained from the system through deliberate and coordinated policy actions.
CBN data indicate that January’s liquidity squeeze was driven largely by large-scale sterilisation efforts, with multiple tools deployed simultaneously to absorb excess naira liquidity.
These outflows were only partially offset by inflows from maturing OMO bills, treasury repayments, and limited recourse to the Standing Lending Facility (SLF), leaving the banking system significantly cash-strapped by month-end.
Analysts describe the January outcome as a clear signal of the CBN’s policy priorities. According to Ayodele Akinwunmi, Head of Research at FSDH Merchant Bank, the central bank is firmly focused on macroeconomic stability rather than easing liquidity conditions.
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He said the intensity of OMO activity suggests the bank is in no hurry to relax policy, especially with potential election-related foreign exchange pressures looming.
Market sentiment in the treasury bills space also reflects cautious optimism rather than confidence in immediate easing.
Blakey Ijezie, founder of Okwudili Ijezie & Co, noted that while investors believe interest rates may be close to their peak, they are still reluctant to make aggressive bets on near-term rate cuts. Instead, he said, investors are selectively extending duration while maintaining a cautious stance.
Tilewa Adebajo, Chief Executive Officer of CFG Advisory, explained that the aggressive use of OMO remains central to the CBN’s inflation-fighting strategy.
While the approach raises funding costs and ultimately affects businesses and households, he said the overriding objective is to rein in inflationary pressures and preserve overall system stability.
The immediate effects of the liquidity crunch were evident in the money market, where funding stress intensified as banks scrambled for cash. Both the Open Buy Back (OBB) and Overnight rates climbed above 26 percent during the month, underscoring sustained funding pressure across the banking system.
January 2026 marked one of the most aggressive liquidity mop-up phases by the CBN in recent months, undertaken against the backdrop of excess money supply and a sharp rise in cash outside the banking system.
By intensifying treasury bill and OMO sales, the apex bank reinforced its tightening stance aimed at curbing inflation and managing exchange rate pressures.