CBN Withdraws N13.41tn From Financial System as Money Supply Contracts

The Central Bank of Nigeria withdrew approximately N13.41 trillion from the financial system in January 2026, significantly higher than the N2.77 trillion mopped up during the same period the previous year.

The liquidity tightening coincided with a contraction in key monetary indicators, including broad money supply, bank reserves, and credit to the private sector.

Financial data released for the period show that the move reflects an aggressive liquidity management strategy aimed at curbing inflationary pressures and stabilising the financial system.

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Broad money supply, also known as M3, declined by 0.8 per cent month-on-month to N123.36 trillion in January, compared with N124.41 trillion recorded in December 2025.

Narrow money supply, which represents more liquid forms of money that can easily circulate within the economy, also dropped slightly to N123.35 trillion from N124.40 trillion.

Credit to the private sector fell by 0.8 per cent to N75.24 trillion, down from N75.83 trillion recorded in December. Government credit also edged lower, declining marginally to N34.19 trillion.

Bank reserves experienced a sharper decline of 5.5 per cent, falling to N30.26 trillion from N32.04 trillion. Analysts attribute the drop largely to the central bank’s liquidity sterilisation measures.

Despite the tightening in January, the Monetary Policy Committee later reduced the benchmark interest rate from 27 per cent to 26.5 per cent, suggesting that the peak of the tightening cycle may have been reached.

A breakdown of monetary aggregates showed contrasting movements between foreign and domestic assets within the banking system.

Net foreign assets fell by six per cent to N29.61 trillion from N31.51 trillion recorded in December. Over a five-month period, the figure has declined significantly from N41.66 trillion recorded earlier in the year.

In contrast, net domestic assets increased to N93.76 trillion from N92.90 trillion, supported by continued expansion in domestic credit.

Currency outside banks also declined by 3.7 per cent to N5.21 trillion from N5.41 trillion, while total currency in circulation remained relatively stable at N5.73 trillion.

The figures indicate tighter liquidity conditions across the interbank market during the period as authorities maintained a cautious approach to managing inflation and maintaining macroeconomic stability.