Cash Outside Banks Drops to N5.20trn as Post-Festive Liquidity Eases—CBN Data Reveals

Marginal decline signals normalization, but Nigeria’s heavy cash reliance still poses policy challenges

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By Baron Eloagu | Abuja, Nigeria

Nigeria’s cash liquidity cycle is showing early signs of normalization, with currency held outside the banking system declining slightly to N5.20 trillion in February 2026.

However, analysis of the latest data from the Central Bank of Nigeria (CBN) indicates that while liquidity pressures are easing, structural dependence on physical cash remains deeply entrenched.

According to the CBN’s Money and Credit Statistics, currency outside banks fell by 0.058 per cent month-on-month, down from N5.21 trillion in January and below the December 2025 peak of N5.41 trillion.

At the same time, total currency in circulation remained largely stable at N5.73 trillion, suggesting that the decline reflects a gradual return of cash into the formal banking system rather than a contraction in liquidity.

Money supply also dipped marginally to N123.14 trillion in February from N123.35 trillion in January, reinforcing signs of easing excess liquidity following the year-end spending cycle.

Seasonal Trend or Structural Shift?
Data analysis shows the February moderation aligns with a recurring seasonal pattern in Nigeria’s economy, where cash demand spikes during the festive period before tapering off in the new year.

Cash outside banks rose sharply in the final quarter of 2025—from N4.65 trillion in October to N5.41 trillion in December—driven by increased consumer spending, informal sector transactions, and cash withdrawals.

The subsequent decline in January and February reflects households and businesses redepositing surplus cash after the holidays.

However, analysts caution that the marginal scale of the drop suggests normalization rather than a structural shift toward reduced cash dependency.

Persistent Cash Dominance
Despite the easing trend, Nigeria remains a predominantly cash-driven economy, particularly within the informal sector, which accounts for a significant share of transactions.

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Investigations indicate that limited digital infrastructure, trust deficits in electronic payment systems, and uneven financial inclusion continue to sustain high levels of cash usage.

Even at N5.20 trillion, the volume of cash held outside banks underscores the challenge facing monetary authorities in deepening financial intermediation.

Implications for Monetary Policy
The gradual return of cash into the banking system is expected to improve liquidity recycling, potentially enhancing the effectiveness of monetary policy transmission.

When more funds are held within the formal banking system, financial institutions are better positioned to extend credit and support economic activity.

However, experts note that sustained improvements will require more than seasonal adjustments, pointing to the need for structural reforms that encourage digital adoption and reduce reliance on physical cash.

Broader Liquidity Outlook
The February figures build on a similar moderation recorded in January, suggesting a steady post-festive adjustment cycle.

While this trend signals short-term stability, questions remain about long-term liquidity dynamics, especially in the face of inflationary pressures, currency volatility, and evolving monetary policies.

The decline in cash outside banks offers a tentative sign of liquidity normalization in Nigeria’s financial system.

Yet, without deeper structural changes, the country’s entrenched cash culture is likely to persist, limiting the full impact of monetary policy and financial sector reforms.