The Central Bank of Nigeria (CBN) sterilised N4.11 trillion from the financial system within one week through dual Open Market Operations (OMO) sales conducted on March 23 and 27, 2026.
Financial data released by the apex bank at the close of business on Friday, March 27, confirmed the scale of liquidity mop-up as well as inflows, indicating the persistence of excess cash with elevated opening balances of Banks/Discount Houses at record N716.033 billion.
The move comes amid sustained monetary tightening efforts aimed at curbing inflation, even as analysts warn of potential risks to Nigeria’s long-term growth ambitions.
What the data is saying
The CBN’s aggressive liquidity management reflects a continued tightening stance designed to stabilise prices and control excess cash in the banking system. However, the scale and frequency of these interventions have raised concerns among market participants about their broader economic implications.
- The CBN mopped up N4.11 trillion through two OMO auctions, draining N2.357 trillion on March 23 and N1.753 trillion on March 27.
- Financial system liquidity was partly offset by N2.985 trillion injections, resulting in a net withdrawal of N1.125 trillion.
- Banks deposited significant funds at the Standing Deposit Facility (SDF), including N7.968 trillion, N8.551 trillion, and N6.800 trillion on Wednesday, Thursday, and Friday respectively.
- Earlier in the week, banks parked N8.176 trillion and N6.592 trillion on Monday and Tuesday to earn about 22.28% overnight interest.
The CBN’s decision to maintain attractive interest rates above 22% on the SDF has incentivised deposit money banks to channel excess liquidity into the apex bank rather than into productive lending activities.
More insights
In this first quarter of 2026, CBN deployed Open Market Operations (OMO), Treasury bill issuances, and the Standing Deposit Facility (SDF) to absorb excess funds.
- In January alone, over N13.41 trillion was withdrawn, reflecting an aggressive tightening stance aimed at moderating inflation and money supply.
- By March, liquidity conditions remained elevated, with banking system balances exceeding N8 trillion despite repeated interventions.
- The CBN conducted a N2.36 trillion OMO mop-up on March 23, temporarily tightening liquidity, though funds quickly rebounded due to persistent inflows from maturing securities and investor positioning.
- This pattern of recurring large-scale mop-ups failed to fully drain excess liquidity as structural inflows and maturing instruments continue to offset tightening, suggesting the CBN must sustain frequent and sizable interventions to stabilise yields, inflation, and foreign exchange pressures.
But analysts insist that the key challenge is not just liquidity levels but ensuring that available funds are channelled into productive sectors that drive real economic growth rather than speculative investments. They argue that persistent sterilisation may undermine economic expansion.
Expert views
Analysts argue that liquidity should not automatically be viewed as a threat to macroeconomic stability, especially for an economy targeting rapid expansion.
They maintain that growing economies typically experience increased money supply as business activity and infrastructure spending rise.
- “If you want economic growth, you must be ready to accommodate some level of inflation,” said Mr. Olubunmi Ayokunle, Head of Financial Institutions Ratings at Augusto & Co.
- “When the MPR is high, banks borrow at higher costs and pass those costs to manufacturers and importers. That pushes up prices,” said Mr. Blakey Ijezie, Founder of Okwudili Ijezie & Co.
- “You want the economy to expand and you are sterilising liquidity. With what will the economy expand?” Ijezie queried.
Ijezie added that even a further 50-basis-point cut in the Monetary Policy Rate could ease borrowing costs and lower production expenses.
- Ijezie described the policy stance as potentially contradictory, warning that excessive sterilisation could restrict funds needed for growth.
- Ayokunle noted that inflation risks arise when liquidity expands without corresponding productive output, stressing the importance of directing funds into infrastructure, manufacturing and agro-processing.
- Ijezie criticised subnational governments for prioritising non-productive spending instead of investments that generate employment and exports.
Both experts stressed that aligning monetary policy with productivity growth is critical to ensuring that liquidity supports expansion rather than fuelling inflationary pressures.
What you should know
Nigeria’s ambition to grow into a N1 trillion economy by 2030 remains a central pillar of President Bola Tinubu’s economic agenda, supported by fiscal and structural reforms aimed at boosting investment and macroeconomic stability. However, achieving this target will require a delicate balance between inflation control and growth-supportive policies.
- The CBN sterilised more than N13 trillion from the banking system in January 2026 alone through high-yield OMO auctions and Treasury bill issuances.
- Additional liquidity has been mopped up between February and March as tightening measures intensified.
- Banks continue to take advantage of the 22.28% interest rate at the SDF window by parking excess funds with the apex bank.
Analysts warn that prolonged tightening could discourage private sector borrowing and slow industrial expansion. The economists maintain that while price stability is essential, sustaining adequate liquidity will be critical for financing investments and achieving Nigeria’s long-term growth objectives.
