CBN Sterilizes N15 Trillion in Aggressive Monetary Tightening

The Central Bank of Nigeria (CBN) has executed a massive liquidity withdrawal, removing over N15 trillion from the banking system in January 2026. This aggressive sterilization maneuver underscores the regulator's commitment to a hawkish monetary stance aimed at curbing persistent inflation and stabilizing the Naira (NGN) against foreign exchange risks.

Liquidity Squeeze and Market Impact

The withdrawal represents a significant tightening of financial conditions, aimed at reducing the money supply to rein in consumer price pressures. By sterilizing such a vast amount of local currency, the CBN is effectively raising the cost of holding liquidity, a move designed to support the exchange rate by limiting speculative attacks on the Naira. Analysts suggest this intense pressure on the financial markets is likely to persist through Q1 2026 as the apex bank prioritizes price stability over credit expansion.

Banking Sector Retreats to Sovereign Debt

Concurrently, S&P Global reports that government securities now account for approximately 11% of Nigerian banks‘ total assets. This structural shift reflects a risk-off sentiment within the banking sector. lenders are increasingly favoring the safety of sovereign instruments over credit extension to the real economy, a trend exacerbated by the CBN’s restrictive policies.

• Total Liquidity Withdrawal: N15 trillion
• Timeline: January 2026
• Bank Exposure to Sovereign Debt: 11%
• Core Currency: NGN