CBN Intensifies Liquidity Mop-Up, Sterilizes N3.57 Trillion in Three Days
The Central Bank of Nigeria (CBN) has executed a significant liquidity sterilization operation, absorbing over N3.57 trillion from the banking system within a three-day period. This aggressive intervention, conducted between Tuesday, February 17, and Thursday, February 19, 2026, saw deposit money banks channeling substantial surplus cash into the CBN’s Standing Deposit Facility (SDF). The SDF window allows banks to warehouse excess liquidity overnight at an interest rate of approximately 22.8%, according to data from FMDQ.
This decisive action was a direct response to sustained high system liquidity, which analysts at Coronation Research noted had exceeded N4 trillion. Despite prior absorptions through Open Market Operations (OMO) and primary market issuances, banks continued to deploy significant funds into the SDF. The total sterilization of N3.57 trillion was achieved through a combination of OMO sales, primary market issuances, and persistent SDF placements. Of this, combined direct market instruments accounted for approximately N1.57 trillion in withdrawals, with the SDF usage underscoring the scale of the liquidity surplus.
Analysts indicate that this elevated liquidity reflects broader structural and fiscal dynamics, including historically high FAAC allocations and the lingering effects of past Ways and Means financing, rather than immediate funding stress. This perspective is supported by minimal usage of the Standing Lending Facility and modest opening balances relative to the scale of the CBN’s policy absorptions. Funds disbursed for government projects often re-enter the banking system, contributing to the liquidity build-up.
The CBN’s multi-trillion-naira sterilization drive, while crucial for its inflation containment and monetary tightening objectives, carries a significant fiscal cost. As the presidential committee pushes back on certain economic measures, the CBN must navigate a complex landscape. Sustained large-scale liquidity mop-ups increase borrowing costs and have the potential to slow credit growth in the real economy. This leaves the central bank with the delicate task of balancing inflation control with the need to maintain economic recovery momentum, a challenge that requires precise calibration of policy tools.
Kelechukwu Mgboji is a Bloomberg-certified financial journalist with extensive experience covering Nigeria’s financial markets. He provides expert analysis on market trends and corporate performance, known for translating complex data into actionable insights for investors and policymakers across Africa.
