The Central Bank of Nigeria (CBN) has intensified its monetary tightening measures ahead of the 2027 election cycle, draining a record amount of liquidity from the financial system through aggressive Open Market Operations (OMO). Analysts say the move is aimed at preventing inflationary pressures and exchange rate instability that often accompany heavy political spending during pre-election periods.
Data from the Financial Markets Dealers Association (FMDA) showed that OMO sales reached N30.12 trillion between January and April 2026, nearly matching the total amount sold throughout 2025. The sharp increase highlights the apex bank’s determination to absorb excess cash circulating in the economy while protecting the naira from volatility linked to rising campaign-related expenditures.
Despite concerns over declining external reserves, the naira has remained relatively stable across both official and parallel foreign exchange markets. FMDA reported improved FX liquidity in April, with total turnover at the Nigerian Foreign Exchange Market (NFEM) rising to $8.51 billion. On Thursday, the naira appreciated slightly at the official market, closing at N1,355.85 per dollar compared to N1,357.34 recorded a day earlier, according to CBN data.
Financial analysts believe the surge in OMO activity also reflects the CBN’s strategy to attract foreign portfolio investors seeking high-yield assets amid global economic uncertainty. Ayokunle Olubunmi of Agusto & Co. noted that geopolitical tensions in the Middle East have triggered capital movement toward safer markets, pushing Nigeria to offer attractive yields on government securities. Recent OMO auctions recorded subscriptions of about N1.6 trillion, signaling strong investor appetite for high-return instruments.
Experts, however, warn that while aggressive OMO sales may help stabilise inflation and support FX liquidity, the policy could also weaken private sector lending. Adebowale Funmi of Parthian Securities explained that banks may prefer investing in risk-free government instruments offering yields between 19 and 22 percent rather than extending loans to businesses. Analysts say the trend could increase borrowing costs, slow credit growth, and place additional pressure on Nigeria’s real sector despite improving investor confidence.
source: Business day