Nigeria’s money supply dropped to a four-month low in January as the Central Bank of Nigeria (CBN) intensified efforts to tighten liquidity in the financial system in a bid to rein in inflationary pressures and stabilise the broader economy.
Data released by the apex bank showed that broad money supply (M3) declined by 0.84 per cent month-on-month to N123.36 trillion in January 2026, down from N124.41 trillion recorded in December 2025. The latest figure represents the weakest level in four months and reflects the impact of aggressive liquidity management measures implemented at the start of the year.
The last comparable decline occurred in September 2025, when money supply fell to N117.78 trillion from N119.69 trillion in the previous month.
Despite the monthly contraction, money supply remained higher on an annual basis. On a year-on-year basis, the figure rose by 11.04 per cent from N111.10 trillion recorded in January 2025, indicating that overall liquidity in the system remains elevated compared with the same period last year.
Analysts at the Financial Market Dealers Association (FMDA) Research attributed the tightening liquidity conditions to substantial cash withdrawals from the banking system by the central bank. According to the group’s analysis, the CBN mopped up about N13.41 trillion in January 2026, a sharp increase compared with the N2.77 trillion absorbed during the same period in 2025.
The scale of the liquidity sterilisation exercise contributed to the modest contraction recorded in both money supply and reserve balances during the month.
Currency in circulation also recorded a marginal decline. Data showed that cash outside the banking system slipped by 0.003 per cent month-on-month to N5.731 trillion in January, compared with N5.733 trillion in December.
However, on a year-on-year basis, currency in circulation increased by 9.47 per cent from N5.235 trillion in January 2025, suggesting a steady expansion in cash holdings over the longer term.
Money held outside the banking sector recorded a sharper monthly decline, falling by 3.66 per cent to N5.210 trillion in January from N5.408 trillion in December. Yet the figure remained 9.99 per cent higher than the N4.737 trillion recorded in January last year, indicating that informal cash holdings remain elevated despite recent policy tightening.
The January decline followed a broader slowdown in money supply growth observed towards the end of last year. Nigeria’s money supply growth had earlier dropped to a five-year low of 12.83 per cent in November 2025 as the central bank intensified its campaign to curb excess liquidity as part of its anti-inflation strategy.
Over the past year, the CBN has significantly expanded its liquidity mop-up operations through instruments such as Open Market Operations (OMO) and the Standing Deposit Facility, which enable commercial banks to deposit excess funds with the regulator.
Data from the apex bank showed that OMO sales surged by 1,607.03 per cent year-on-year to N8.53 trillion in January 2026, compared with about N500 billion recorded in January 2025. The dramatic increase in OMO issuance underscores the regulator’s more aggressive stance in managing liquidity across the financial system.
Commenting on the development, Ayodeji Ebo, Managing Director and Chief Business Officer at Optimus by Afrinvest, said the sharp rise in OMO sales highlights the central bank’s commitment to managing excess liquidity, controlling inflation and supporting exchange-rate stability.
He noted that higher OMO issuances tend to attract foreign portfolio inflows seeking improved yields while also influencing domestic interest rates and borrowing costs.
“It signals a tightening monetary stance aimed at stabilising the economy, although its effectiveness will depend on broader fiscal policies and external conditions,” Ebo said.
Meanwhile, credit conditions also reflected the tighter liquidity environment. Credit to government edged down by 0.09 per cent month-on-month to N34.19 trillion in January from N34.221 trillion recorded in December 2025.
However, on an annual basis, government credit expanded significantly by 36.59 per cent from N25.03 trillion in January 2025.
Private sector credit recorded a modest decline as well, falling by 0.78 per cent month-on-month to N75.241 trillion in January from N75.834 trillion in December. Year-on-year, private sector credit grew by 2.76 per cent, although this was from a higher base of N77.377 trillion recorded in January last year, reflecting slower lending momentum under tight financial conditions.
Analysts at FMDA noted that the decision by the CBN’s Monetary Policy Committee on February 24, 2026, to reduce the Monetary Policy Rate from 27 per cent to 26.5 per cent could begin to influence credit conditions in the coming months.
They said the adjustment may gradually support lending activity as banks respond to slightly lower funding costs and evolving liquidity conditions from March onward.
However, the analysts cautioned that any meaningful recovery in lending will depend largely on government borrowing needs and overall system liquidity, suggesting that while policy easing may have begun, monetary conditions remain tight and carefully calibrated to balance inflation control with economic growth.
