The Central Bank of Nigeria (CBN) has withdrawn about N59.3 trillion from the financial system since January 2026 as part of efforts to tighten liquidity ahead of the 2027 general elections and reduce the risk of election-related cash surges that could encourage vote buying.
The development was disclosed in CardinalStone Research’s 2026 Mid-Year Economic Outlook released by CardinalStone Securities Limited (CSSL), a subsidiary of CardinalStone Partners Limited.
According to the report, the apex bank’s aggressive liquidity management strategy is aimed at preventing excess cash from flooding the economy during the election period while also supporting monetary stability.
The report said the CBN’s actions reflect concerns previously raised by members of the Monetary Policy Committee (MPC) over the possibility of election-driven liquidity injections and increased demand for foreign exchange as political activities gather momentum.
“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.
According to CardinalStone, the CBN has mopped up N59.3 trillion through its liquidity management operations since the beginning of the year, with net issuance standing at N19.8 trillion. The report also revealed that foreign portfolio investors currently hold about $18.5 billion in Open Market Operations (OMO), reflecting continued investor confidence and the central bank’s efforts to strengthen Nigeria’s external reserves.
The tightening policy has already begun to affect the country’s money supply. Money supply growth (M3) slowed to 8.4 percent year-on-year in May 2026, well below the five-year average of 28 percent. CardinalStone said the figure is close to the estimated optimal money supply growth rate of 8.6 percent, suggesting that the CBN is carefully balancing economic growth with the need to control inflation and limit speculation against the naira.
The report also noted that the CBN has introduced broader reforms, including a revised foreign exchange manual designed to improve market regulation, strengthen documentation requirements and increase transparency in the foreign exchange market.
CardinalStone expects the central bank to maintain its tight monetary policy throughout the rest of 2026, with a gradual easing likely after the 2027 elections. The firm projects headline inflation to average 15.9 percent this year before slowing further to 14 percent in 2027.
It, however, warned that the outlook could be affected by renewed geopolitical tensions in the Middle East, rising global energy prices, unexpected domestic or international economic shocks and possible policy reversals.
The report recalled that the disinflation trend expected earlier in the year was interrupted by the conflict involving the United States, Israel and Iran, which pushed up global crude oil prices and added more than 300 basis points to Nigeria’s headline inflation between March and June 2026. It added that the June ceasefire between the United States and Iran has helped ease oil prices, with inflation expected to resume a downward trend from July.
The CBN’s latest move comes against the backdrop of growing concerns over the role of cash in Nigeria’s elections. The 2023 presidential election, one of the most hotly contested polls in the Nigeria’s democratic history, was marred by allegations of vote buying in several parts of the country.