LAGOS – Cash held outside Nigeria’s banking system declined by N104.76 billion between February and April 2026, defying expectations following the Central Bank of Nigeria’s decision to cut interest rates at its first annual policy meeting in February.
Latest data from the apex bank reveals that currency outside bank vaults dropped 2.02% from N5.19 trillion in February—when the Monetary Policy Rate was reduced to 26.5%—down to N5.08 trillion in April.
The contraction indicates a surprise tightening of cash liquidity within the formal economy, moving away from informal channels despite a lower benchmark interest rate that traditionally encourages spending over saving.
Concurrently, total currency in circulation fell by N63.46 billion to N5.65 trillion in April, meaning currency held outside banks now accounts for 90.03% of total cash, down from 94.33% in December 2025.
The Central Bank did not publish money and credit statistics for March 2026, preventing a month-on-month comparison, but the two-month aggregate trend underscores a clear structural shift.
Meanwhile, commercial bank reserves held at the central bank spiked 5.68% during the review period, expanding by N1.86 trillion to hit N34.60 trillion by April 2026.
This liquidity shift aligns with broader macroeconomic realities, as recent data puts Nigeria’s headline inflation rate at 15.69% for April 2026, keeping real interest rates firmly positive.
Market analysts note that aggressive open market operations by the apex bank alongside stricter digital transaction compliance frameworks have continuously forced informal capital back into the formal banking system.
However, cash dominance persists long-term; currency outside banks is up 11.29% year-on-year from the N4.57 trillion recorded in April 2025, showing the informal sector’s enduring grip.
