Recent data from the CBN revealed that as of August 22, 2025, the bank had withdrawn ₦13.35 trillion from the financial system—a sharp rise from ₦7.45 trillion recorded during a similar eight-month period ending August 27, 2024, marking an impressive 79.2% increase.
This aggressive liquidity mop-up has not only eased inflationary pressures but also contributed to stabilising the naira, according to the CBN.
Why It Matters
- Inflation control: By removing excess liquidity, the CBN is tightening monetary conditions, reducing the scope for rapid price increases.
- Currency stabilization: Less naira in circulation helps curb depreciation, thereby supporting the domestic currency’s value.
- Strategic policy stance: This approach signals a firm commitment by the CBN to regain price stability and financial equilibrium.
Broader Monetary Strategy
The CBN’s actions form part of a broader, hawkish monetary policy stance adopted since Governor Olayemi Cardoso’s leadership began. This includes previous interest rate hikes and higher reserve requirements aimed at tightening liquidity securitiesafricang.comIMF.
Moreover, structural reforms, such as the adoption of an inflation-targeting framework and formalizing open-market operations as a key tool for liquidity management, underline the CBN’s shift toward more market-based, well-structured monetary controls Central Bank of Nigeria+1.
What to Watch Next
- Inflation trajectory: Will sustained liquidity withdrawal translate to continued slowdown in price rises?
- Market reaction: Investors will monitor whether this policy helps attract foreign capital and restore confidence in the financial system.
- Retail impact: Changes in interest rates and liquidity levels may influence lending rates, deposits, and overall economic activity—particularly in sectors sensitive to credit availability.
