The Central Bank of Nigeria (CBN) withdrew N13.41 trillion from the financial system in January 2026, nearly five times higher than the N2.77 trillion mopped up in the same period last year, as money supply and private sector credit declined.
This is according to the Monetary and Credit Statistics for January 2026 published by the Financial Markets Dealers Association (FMDA) and obtained by Nairametrics on Wednesday, March 4, 2026.
The data show a broad-based contraction in liquidity, with broad money (M3), bank reserves, and private credit all recording month-on-month declines, reflecting an aggressive tightening stance by the apex bank at the start of the year.
What the data is saying
The latest figures indicate that money supply declined in January 2026 following an expansionary cycle in December 2025 that saw currency in circulation spike. The contraction underscores the apex bank’s sterilisation drive aimed at tightening liquidity and curbing inflationary pressures.
- Broad Money (M3), which measures total money supply in the economy, fell by 0.8% month-on-month to N123.36 trillion in January from N124.41 trillion in December 2025.
- Narrow Money (M2), representing more liquid forms of money that can be easily accessed and spent, also declined to N123.35 trillion from N124.40 trillion.
- Private sector credit moderated by 0.8% to N75.24 trillion in January, down from N75.83 trillion in December 2025, while credit to government edged lower by 0.1% to N34.19 trillion from N34.22 trillion.
- Bank reserves dropped by 5.5% to N30.26 trillion from N32.04 trillion, reflecting the direct impact of the liquidity mop-ups.
Despite the January squeeze, the Monetary Policy Committee’s decision to reduce the benchmark rate from 27% to 26.5% on February 24 suggests the peak of monetary tightening may have been reached.
More insights
A breakdown of the monetary aggregates reveals divergent movements between foreign and domestic assets within the banking system. While foreign assets declined sharply, domestic assets continued their upward trajectory, supported by domestic credit expansion.
- Net Foreign Assets (NFA) fell by 6.0% to N29.61 trillion in January from N31.51 trillion in December.
- Net Domestic Assets (NDA) rose by 0.9% to N93.76 trillion, compared to N92.90 trillion in December 2025.
- Over a six-month period, NFA declined significantly from N41.66 trillion in September 2025 to N29.61 trillion in January 2026.
- In contrast, NDA increased steadily from N76.12 trillion in September 2025 to N93.76 trillion in January 2026.
The report also showed that Currency Outside Banks (COB) declined by 3.7% to N5.21 trillion from N5.41 trillion, while currency in circulation remained broadly stable at N5.73 trillion, pointing to tighter interbank liquidity conditions through January.
What you should know
The CBN maintained an aggressive monetary tightening policy for most of 2025, deploying Open Market Operations (OMO) and Treasury Bills issuances to absorb excess liquidity.
- Despite regular mop-up efforts, system liquidity remained elevated, peaking in November and December 2025.
- January 2026 data reflect a firm tightening stance, with significant liquidity sterilisation and reduced money supply.
- The subsequent Monetary Policy Rate (MPR) cut in February 2026 signals a significant move towards a gradual easing cycle.
- Analysts expect improved liquidity conditions and lower policy rates to begin influencing credit dynamics from March onward.
FMDA is the professional body of dealing members from commercial banks and other authorized financial institutions who trade in Nigeria’s interbank and over the counter (OTC) markets.
They are active dealers in Treasury bills (T-bills), Bonds, foreign exchange (forex), money market instruments, and other fixed-income securities.
