The Central Bank of Nigeria (CBN) withdrew a net N2.87 trillion from the financial system in the first eleven months of 2025, reflecting escalating government financing needs and the apex bank’s determined push to contain persistent inflationary pressures, according to transaction data from the apex bank.
The liquidity absorption stemmed from the CBN’s execution of N17.59 trillion in primary market sales against N14.72 trillion in repayments between January 2 and November 21, underscoring the delicate balancing act between funding government operations and managing monetary conditions in Africa’s largest economy.
The figures paint a picture of intensifying fiscal pressures as the government increasingly turns to domestic debt markets to bridge budget shortfalls, while monetary authorities simultaneously pursue aggressive tightening measures aimed at stabilizing the embattled naira and reining in inflation that has stubbornly remained in double digits.
First Quarter Surge Sets Tone
The year opened with significant issuance activity. January saw the CBN raise N1.87 trillion through sales of Treasury Bills and Federal Government Bonds, while retiring just N595.78 billion in maturing obligations—a pattern that would define much of the year.
February emerged as one of 2025’s most vigorous months for debt market activity, with primary market sales surging to N3.26 trillion as investors—including commercial banks, pension fund administrators, asset management firms, and individual participants—snapped up government securities. Repayments that month totaled N2.86 trillion.
March maintained the momentum with N3.12 trillion in fresh issuances. Notably, the month recorded the year’s peak repayment figure of N4.08 trillion, reflecting the maturation schedule of instruments issued during the final months of 2024. This substantial redemption temporarily eased the net absorption pressure.
Mid-Year Moderation
Primary market dynamics shifted noticeably in the second quarter. April’s sales declined to N1.54 trillion with N665.02 billion in repayments, while May posted N1.51 trillion in issuances against N1.29 trillion in maturities. By June, new sales had contracted further to N712.02 billion, though repayments remained relatively robust at N954 billion—one of the few months where redemptions exceeded new borrowings.
The fluctuations appeared to track both the maturity profile of earlier debt and evolving government financing requirements as budget implementation progressed.
Summer Lull and Autumn Recovery
July and August marked the year’s quietest period for primary market activity. July recorded N677.75 billion in sales against slightly higher repayments of N951.68 billion. August witnessed an even sharper contraction, with issuances dropping to N477.04 billion—the year’s lowest—while repayments plummeted to just N23.99 billion, reflecting a thin pipeline of maturing securities during the month.
The slowdown proved temporary. September signaled a rebound with N930.35 billion in new issuances and N538.42 billion in repayments as market activity normalized.
October delivered one of the strongest performances in the year’s second half, with primary market sales climbing to N1.85 trillion and repayments reaching N1.15 trillion. Market participants reported heightened interest in medium- and long-term government securities during this period, suggesting investor confidence in longer-dated instruments despite prevailing economic uncertainties.
Year-End Balance
The first three weeks of November showed relatively balanced activity, with N1.64 trillion in sales closely matched by N1.61 trillion in repayments. The narrow gap suggested more synchronized funding and redemption dynamics as market participants positioned ahead of December’s scheduled auctions.
Policy Implications
The sustained net liquidity withdrawal of N2.87 trillion represents a significant monetary policy signal. By absorbing more cash than it returns to the financial system through debt operations, the CBN is effectively tightening money supply—a strategy consistent with its stated objective of combating inflation through reduced liquidity in circulation.
However, the substantial gross borrowing of N17.59 trillion also highlights the government’s continued heavy reliance on domestic debt markets to finance operations, raising questions about debt sustainability and the potential crowding-out of private sector credit.
The data confirms that throughout 2025, government securities remained a cornerstone of domestic financing operations, with consistent participation from institutional and retail investors despite ongoing economic challenges facing the nation.
As Nigeria approaches year-end, market watchers will be monitoring whether the established pattern of aggressive issuance and net liquidity absorption continues, and what implications this holds for interest rates, inflation outcomes, and overall economic stability in 2026.
WHAT YOU SHOULD KNOW
Nigeria’s government borrowed heavily from domestic markets in 2025, with the Central Bank issuing N17.59 trillion in securities while repaying only N14.72 trillion—creating a net N2.87 trillion cash withdrawal from the economy.
This dual strategy reveals a critical tension: the government desperately needs funds to cover budget deficits, while the CBN simultaneously drains money from the system to fight inflation and stabilize the naira. The result is tighter liquidity conditions that could make borrowing more expensive for businesses and households, even as the government itself continues absorbing available credit.
Whether this aggressive balancing act successfully controls inflation without choking economic growth remains the critical question heading into 2026.
