Cash outside banks Nigeria falls to N5.21tn in January 2026, according to Central Bank data, though over 90% of currency remains outside the banking system

Cash held outside Nigeria’s banking system declined by N197.68bn to N5.21tn in January 2026, according to the latest Money and Credit Statistics released by the Central Bank of Nigeria.

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The data showed that currency outside banks dropped from N5.41tn in December 2025 to N5.21tn in January 2026, reflecting a month-on-month decrease of N197.68bn.

Despite the decline, the share of physical cash outside deposit money banks remained overwhelmingly high. The proportion of currency in circulation held outside banks stood at 90.91 per cent in January.

This means that more than nine-tenths of Nigeria’s cash in circulation remained outside the vaults of banks during the period under review, although the ratio was slightly lower than the 94.33 per cent recorded in December.

Total currency in circulation also slipped marginally during the month, falling by N1.74bn to N5.731tn in January from N5.732tn in December.

Cash Use Still Dominates Economy

The figures indicate that while some cash returned to the banking system between December and January, the structure of cash usage in the Nigerian economy continues to be heavily tilted toward physical cash retention outside formal banking channels.

A year-on-year comparison showed that cash outside banks remained significantly higher than the level recorded a year earlier.

In January 2025, currency outside banks stood at N4.74tn. By January 2026, the figure had risen to N5.21tn, representing an annual increase of N473bn.

Similarly, total currency in circulation expanded by N495.68bn year-on-year, rising from N5.24tn in January 2025 to N5.73tn in January 2026.

Money Supply Contracts

Meanwhile, Nigeria’s broad money supply declined during the month, largely due to a fall in the country’s net foreign assets.

Data published by the Central Bank of Nigeria showed that broad money supply, known as M3, fell from N124.41tn in December 2025 to N123.36tn in January 2026, representing a month-on-month contraction of N1.05tn.

M3 represents the broadest measure of money circulating in an economy, including physical currency, bank deposits and other highly liquid financial instruments.

Despite the monthly drop, the data indicated that money supply expanded strongly compared with the previous year. Broad money stood at N111.11tn in January 2025, meaning the latest figure represents a year-on-year increase of N12.26tn.

Foreign Assets Decline

The contraction in liquidity was largely driven by a drop in Nigeria’s net foreign assets.

According to the apex bank’s data, net foreign assets declined to N29.61tn in January 2026 from N31.51tn in December 2025, marking a monthly fall of N1.90tn.

Net foreign assets represent the foreign holdings of the banking system, including reserves, foreign currency deposits and other external financial assets held by the central bank and commercial banks.

On an annual basis, foreign assets also declined. In January 2025, the figure stood at N33.19tn, indicating a year-on-year drop of N3.58tn.

The reduction occurred during a period when the naira strengthened in the official foreign exchange market.

According to data from the Central Bank of Nigeria, the Nigerian currency closed January 2026 at about N1,391 to the United States dollar, compared with its opening rate of roughly N1,431 at the start of the month.

Analysts note that when the naira appreciates, the local currency value of foreign assets held by the monetary authorities may decline when converted from foreign currencies.

Domestic Liquidity Expands

While foreign assets declined, domestic liquidity conditions strengthened.

Net domestic assets increased to N93.76tn in January 2026 from N92.90tn in December 2025, representing a monthly increase of about N850.76bn.

On a year-on-year basis, domestic assets rose sharply from N77.92tn in January 2025, indicating an annual increase of N15.83tn.

Further breakdown of the data showed that the narrower liquidity measure known as M2 also declined during the month.

M2 fell to N123.35tn in January 2026 from N124.40tn in December 2025, mirroring the N1.05tn contraction recorded in the broader M3 measure.

MPC Cuts Interest Rate

The developments come amid the central bank’s continued efforts to manage liquidity and control inflation through monetary policy adjustments.

At the end of its 304th meeting in Abuja, the Monetary Policy Committee announced a reduction in the benchmark interest rate.

Governor of the Central Bank of Nigeria, Olayemi Cardoso, said the committee voted to cut the Monetary Policy Rate by 50 basis points to 26.5 per cent.

“The Committee decided to reduce the monetary policy rate by 50 basis points to 26.5 per cent,” Olayemi Cardoso said.

The committee also retained the standing facilities corridor around the MPR at +50 and −450 basis points while maintaining the Cash Reserve Requirement for deposit money banks at 45 per cent and 16 per cent for merchant banks.

According to Olayemi Cardoso, the decision followed a balanced assessment of economic risks and signs of moderating inflation.

Headline inflation eased slightly to 15.10 per cent in January 2026 from 15.15 per cent in December, marking the eleventh consecutive month of year-on-year decline.

Food inflation also dropped to 8.89 per cent from 10.84 per cent, while core inflation declined to 17.72 per cent from 18.63 per cent.

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Analysts said the rate reduction signals cautious optimism about Nigeria’s inflation outlook, although they noted that the move is largely viewed as a credibility-building step rather than the start of aggressive monetary easing.