Cash held outside Nigeria’s banking system fell by N197.68 billion in January 2026, dropping to N5.21 trillion even as the total currency circulating in the economy remained largely unchanged and bank reserves declined sharply, according to the latest Money and Credit Statistics released by the Central Bank of Nigeria. The figures indicate that currency outside banks declined from N5.41 trillion in December 2025 to N5.21 trillion in January 2026, representing a month-on-month decrease, while total currency in circulation slipped marginally by N1.74 billion to N5.731 trillion during the same period. Despite this monthly decline, more than nine-tenths of cash in circulation, or 90.91 percent, remained outside deposit money banks in January, a slight reduction from the 94.33 percent recorded in December 2025.
Comparing the figures with January 2025, cash outside banks increased significantly by N473 billion from N4.74 trillion, while currency in circulation rose by N495.68 billion from N5.24 trillion, indicating that the stock of physical cash in the economy expanded over the 12-month period. The share of currency in circulation outside banks also edged up slightly from 90.48 percent in January 2025 to 90.91 percent in January 2026, reflecting the persistence of cash retention outside formal banking channels.
The data further showed that Nigeria’s broad money supply, or M3, declined by N1.05 trillion to N123.36 trillion in January 2026, largely due to a drop in the country’s net foreign assets, which fell to N29.61 trillion from N31.51 trillion in December 2025. On a year-on-year basis, net foreign assets declined by N3.58 trillion from N33.19 trillion in January 2025. Analysts attributed the reduction partly to a stronger naira in the official foreign exchange market, which closed January at N1,391 to the dollar compared with N1,431 at the start of the month. Domestic liquidity, however, expanded as net domestic assets rose to N93.76 trillion from N92.90 trillion, representing a month-on-month increase of N850.76 billion, and a year-on-year growth of N15.83 trillion from N77.92 trillion in January 2025.
Narrower measures of liquidity also reflected mixed trends. M2, which includes currency in circulation and bank deposits but excludes certain institutional instruments, declined by N1.05 trillion month-on-month to N123.35 trillion. Conversely, narrow money, representing the most liquid form of money in the economy, increased to N42.33 trillion from N42.14 trillion in December 2025, showing a month-on-month rise of N190.76 billion and a year-on-year increase of N5.57 trillion from N36.77 trillion in January 2025. The figures suggest that while domestic credit and transactional money expanded, the decline in foreign assets exerted a strong downward pressure on broad money supply.
The movement in monetary aggregates occurred amid the Central Bank of Nigeria’s ongoing management of liquidity conditions to curb inflation and stabilize the foreign exchange market. Reflecting these dynamics, the Monetary Policy Committee reduced the benchmark interest rate by 50 basis points to 26.5 percent, marking the second rate cut under the current leadership. The CBN Governor announced that the committee also retained the standing facilities corridor around the MPR at +50/-450 basis points and maintained the Cash Reserve Requirement for Deposit Money Banks at 45 percent, Merchant Banks at 16 percent, and 75 percent for non-TSA public sector deposits.
Governor Olayemi Cardoso said the decision was based on a balanced assessment of economic risks, noting that the ongoing disinflation trajectory would continue, supported by the lagged impact of previous monetary tightening, exchange rate stability, and improved food supply. Headline inflation eased to 15.10 percent in January from 15.15 percent in December, marking the eleventh consecutive month of year-on-year decline. Food inflation fell to 8.89 percent from 10.84 percent, while core inflation declined to 17.72 percent from 18.63 percent. On a month-on-month basis, headline inflation dropped to -2.88 percent from 0.54 percent, signaling continued softening of price pressures.
Analysts welcomed the MPC’s rate cut, viewing the reduction to 26.5 percent as a credibility-building measure rather than the start of rapid easing, emphasizing the central bank’s commitment to maintaining price stability while safeguarding the resilience of the financial system.
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