The Central Bank of Nigeria (CBN) has withdrawn a massive N59.3 trillion from the financial system since January 2026 in a deliberate strategy to forestall potential election-related liquidity surges, according to a new report.
The aggressive liquidity mop-up is designed to tighten money supply and prevent excess cash from being used to influence upcoming electoral activities.
The findings are contained in CardinalStone Research’s 2026 Mid-Year Economic Outlook, released by CardinalStone Securities Limited (CSSL), a subsidiary of CardinalStone Partners Limited.
The report notes that the CBN’s actions reflect a proactive stance against risks earlier flagged by Monetary Policy Committee (MPC) members, particularly the possibility of election-driven liquidity injections and heightened foreign exchange demand in the run-up to the polls.
“While data suggests that election cycles do not necessarily translate to FX pressures in isolation, we like that the CBN is taking proactive and cautionary steps,” the report stated. This tightening bias is evident in broader policy measures, including a revised FX manual aimed at modernising market regulation, improving documentation standards, and enhancing transparency.
In its liquidity management operations, the CBN has mopped up N59.3 trillion (with net issuance of N19.8 trillion) since the start of the year. Foreign Portfolio Investor (FPI) holdings in Open Market Operations (OMO) stand at approximately $18.5 billion, underscoring Nigeria’s attractive carry trade and the apex bank’s efforts to build adequate reserves buffers.
The impact of this policy is already visible in monetary aggregates. Money supply growth (M3) slowed sharply to 8.4 percent year-on-year in May 2026, significantly below the five-year average of 28.0 percent. This figure is marginally below the estimated optimal money supply growth rate of 8.6 percent derived from Fisher’s equation, indicating a calibrated approach to support real economic growth while containing inflation and curbing foreign currency speculation.
CardinalStone anticipates that the CBN will maintain a tight monetary policy stance throughout 2026, with a gradual unwind expected after the elections. Headline inflation is projected to average 15.9 percent this year before moderating to 14.0percent in 2027.
Key risks to this outlook include renewed geopolitical tensions in the Middle East, unforeseen internal or external shocks, rebounding energy prices, and potential policy reversals.
The disinflationary trend anticipated at the beginning of the year was disrupted by the US-Israel/Iran conflict, which triggered a spike in global crude oil prices and contributed over 300 basis points to headline inflation between March and June 2026.
However, the June ceasefire agreement between the United States and Iran has helped moderate oil prices.
Analysts now expect month-on-month inflation deceleration to resume from July 2026. This outlook is bolstered by reduced inflation persistence, with the IMF noting that Nigeria’s inflation persistence coefficient has dropped to 0.1 from 1.0 in mid-2023, driven by organic moderation in underlying drivers rather than statistical adjustments.
The CBN’s measured approach signals confidence in managing near-term pressures while safeguarding macroeconomic stability ahead of the electoral cycle.
WARNING: If You Are Not 18+, Don’t Click The Link Below 👇🫣
Did you want to monetize your website, join MONETAG or ADSKEEPER and start earning
Please don’t forget to “Allow the notification” so you will be the first to get our gist when we publish it.
Drop your comment in the section below, and don’t forget to share the post.
Never Miss A Single News Or Gist, Kindly Join Us On WhatsApp Channel:
https://whatsapp.com/channel/0029Vad8g81Eawdsio6INn3B
Telegram Channel:
https://t.me/gistsmateNG
