CBN’s Liquidity Tightening Policy Cuts Commercial Bank Deposits by 42%
Story written by Okafor joseph October 9,2025
The Central Bank of Nigeria (CBN)’s ongoing aggressive liquidity mop-up strategy has led to a sharp 42 percent decline in deposits held by commercial banks, signaling the impact of the apex bank’s monetary tightening measures on the financial system.
Financial analysts attribute the drop to the CBN’s sustained efforts to curb inflation, stabilize the naira, and absorb excess liquidity from the economy through various monetary instruments such as Open Market Operations (OMO), Cash Reserve Ratio (CRR) debits, and treasury bill issuances.
The policy, while aimed at strengthening macroeconomic stability, has significantly reduced the amount of funds available for lending and short-term investments in the banking sector.
Industry experts warn that the steep decline in bank deposits could tighten liquidity conditions further, potentially affecting credit growth, private sector borrowing, and interbank lending rates.
However, the CBN maintains that the mop-up is a necessary step to control inflationary pressures, manage money supply, and sustain confidence in Nigeria’s monetary system.
According to a senior economist, “The decline in bank deposits reflects the CBN’s decisive approach to monetary control. While it may squeeze short-term liquidity, the long-term goal is to achieve price stability and restore market confidence.”
The apex bank is expected to continue its tightening stance in the coming months as part of its broader strategy to stabilize the naira and contain inflation, which remains one of the highest in sub-Saharan Africa.
