Nigeria’s Money Supply Contracts in January 2026 Amidst CBN Tightening Measures

Nigeria’s broad money supply (M3) experienced a slight contraction in January 2026, falling to N123.36 trillion, down from N124.4 trillion in December 2025. This decline reflects the Central Bank of Nigeria’s (CBN) intensified efforts to curb liquidity and address inflationary pressures within the economy.

CBN’s Aggressive Liquidity Management

The CBN has been actively implementing measures to tighten monetary conditions, including aggressive liquidity mop-ups across the banking system. Data released by the CBN indicates that broad money supply (M3) decreased by 0.84 percent month-on-month in January 2026 [1]. This represents the lowest level in four months, signaling the impact of these policies.

Key Indicators and Trends

• Broad Money Supply (M3): Decreased to N123.36 trillion in January 2026 from N124.4 trillion in December 2025 [1], [2], [3].
• Narrow Money Supply (M2): Also declined, standing at N123.35 trillion from N124.4 trillion [1].
• Net Foreign Assets (NFA): Dropped sharply to N29.6 trillion from N31.5 trillion, indicating reduced foreign currency holdings [1].
• Net Domestic Assets (NDA): Rose to N93.76 trillion from N92.9 trillion, signaling continued domestic credit expansion [1].
• Currency in Circulation: Slipped marginally by 0.003 percent month-on-month to N5.731 trillion [1].

Year-on-Year Perspective

Despite the monthly contraction, the money supply remains above January 2025 levels, standing at approximately N111.11 trillion [1]. This indicates sustained monetary growth over the past year. Currency in circulation increased by 9.47 percent year-on-year to N5.235 trillion [1].

CBN’s Tools and Strategies

The CBN has employed several tools to manage liquidity, including Open Market Operations (OMO) and Treasury bill sales. OMO sales surged by 1,607.03 percent year-on-year to N8.53 trillion in January 2026 [1]. These measures aim to control inflation and stabilize the foreign exchange market.

Expert Commentary

Ayodeji Ebo, Managing Director and Chief Business Officer at Optimus by Afrinvest, noted that the increase in OMO sales demonstrates the CBN’s commitment to managing excess liquidity, controlling inflation, and supporting exchange-rate stability [1]. He added that higher OMO issuances can attract foreign portfolio inflows and influence domestic interest rates.

Impact on Credit Conditions

Credit to the government decreased slightly to N34.19 trillion in January, while private sector credit fell to N75.241 trillion [1]. However, the CBN’s Monetary Policy Committee’s recent decision to reduce the Monetary Policy Rate from 27 percent to 26.5 percent may gradually support lending activity in the coming months [1].

Looking Ahead

Analysts caution that a meaningful recovery in lending will depend on government borrowing needs and overall system liquidity. While policy easing has begun, monetary conditions remain tight and carefully calibrated to balance inflation control with economic growth.