Cash Outside Banks Drops by N198bn as Nigeria’s Money Supply Dips in January 2026
Nigeria saw a significant reduction in cash held outside the banking system in January 2026, with N197.68bn returning to formal channels, according to the Central Bank of Nigeria’s (CBN) latest Money and Credit Statistics. Currency outside banks fell to N5.21tn from N5.41tn in December 2025, while total currency in circulation remained nearly flat at N5.73tn. Despite this monthly decline, more than nine-tenths of cash continued to circulate outside formal banking channels, reflecting the country’s strong reliance on physical money.
On an annual basis, however, the picture is different. Cash outside banks rose by N473bn compared with January 2025, when it stood at N4.74tn. Similarly, overall currency in circulation expanded by nearly N496bn over the year, showing that while short-term fluctuations occur, the broader trend points to growing liquidity in physical cash within the economy. Analysts suggest that this pattern underscores the enduring preference for cash-based transactions among businesses and households.
The CBN data also revealed a dip in Nigeria’s broad money supply (M3), which fell by N1.05tn month-on-month to N123.36tn in January 2026. The decline was largely driven by a drop in the country’s net foreign assets, which fell to N29.61tn from N31.51tn in December 2025. Meanwhile, domestic liquidity grew, with net domestic assets rising to N93.76tn, indicating that local credit and lending remained robust despite reduced foreign reserves. Narrow money, the most liquid component of M3, also increased slightly to N42.33tn, highlighting steady transactional activity within the economy.
Monetary policy adjustments accompanied these trends. The CBN’s Monetary Policy Committee (MPC) cut the benchmark interest rate by 50 basis points to 26.5 per cent, citing continued disinflation, exchange rate stability, and improved food supply. Governor Olayemi Cardoso noted that headline inflation fell to 15.10 per cent in January 2026, with food inflation easing to 8.89 per cent. The MPC reaffirmed its commitment to maintaining price stability while ensuring financial system resilience, signaling that the rate cut is a measured response to evolving liquidity conditions rather than the start of aggressive monetary easing.
Overall, January’s data reflects a nuanced picture of Nigeria’s monetary landscape: while cash outside banks decreased slightly, the economy remains heavily cash-driven, and foreign asset declines contributed to a dip in broad money supply. Analysts say these trends highlight the delicate balancing act facing the CBN as it manages liquidity, stabilizes the naira, and navigates ongoing efforts to modernize the financial system while addressing inflationary pressures.
source: punch