The amount of cash held outside Nigeria’s banking system declined to N5.19 trillion in February 2026, marking a modest pullback after several months of elevated currency holdings.
Fresh data released by the Central Bank of Nigeria (CBN) showed that currency outside banks eased from N5.21 trillion in January 2026. The latest figure also represents a notable decline from the N5.40 trillion recorded in December 2025, which remains one of the highest levels seen in recent months.
The latest development points to an emerging moderation in cash demand after a prolonged period of strong currency accumulation across the economy.
Currency in Circulation Also Records a Mild Decline
Figures from the apex bank also revealed a slight drop in overall currency in circulation, which stood at N5.71 trillion in February 2026, compared with N5.73 trillion in January.
Although the change appears marginal, it extends the gradual easing trend observed at the start of the year.
For market observers, the movement suggests that the pressure that pushed cash levels sharply upward toward the end of 2025 may be beginning to soften.
Cash Holdings Remain Higher Than a Year Ago
Despite the recent slowdown, cash outside the banking system remains considerably higher on a year-on-year basis.
In February 2025, currency outside banks stood at N4.51 trillion, meaning the latest figure still reflects a substantial annual increase.
This indicates that while short-term cash holdings have moderated, the broader structural demand for physical cash in the economy remains firmly in place.
Analysts say this trend continues despite ongoing monetary tightening measures by the CBN and sustained efforts by regulators to deepen the use of digital payment channels across the country.
How Cash Demand Built Up Over the Past Year
A closer look at developments over the last twelve months shows that cash holdings rose steadily throughout 2025.
The increase was largely driven by a combination of inflationary pressures, rising transaction volumes, and precautionary behaviour by households and businesses seeking liquidity amid uncertain economic conditions.
As the year progressed, demand for cash intensified. By the middle of 2025, the amount of currency held outside the formal banking system had already crossed the N5 trillion mark.
Economic analysts attributed that trend to growing transaction needs, increased cost pressures, and a preference among many individuals and small businesses to maintain higher cash reserves.
December 2025 Hit Record High
The strongest surge came toward the end of 2025.
In December 2025, currency outside banks climbed to N5.40 trillion, reaching its highest point during the period under review.
Several factors contributed to the sharp rise. Seasonal spending during the festive period typically drives stronger demand for physical cash. In addition, year-end liquidity injections and concerns over the reliability of electronic payment channels during peak transaction periods also influenced the spike.
Historically, demand for physical cash tends to rise sharply during periods of heightened consumer activity, and the December figures reflected that familiar pattern.
February Data Signals a Shift in Trend
The latest numbers suggest that the market may be entering a new phase.
The decline from January to February 2026 marks the first sustained moderation in cash held outside banks after several months of uninterrupted expansion.
While the movement remains relatively modest, it is being viewed as an important signal that the rapid pace of cash accumulation seen in late 2025 may be slowing.
Financial analysts note that a consecutive monthly decline often provides a clearer indication of changing liquidity behaviour than a single-month adjustment.
Similar Pattern Seen in Currency in Circulation
A comparable trend was also visible in total currency in circulation.
Throughout much of 2025, currency in circulation expanded steadily, reflecting broader monetary growth and Nigeria’s long-standing dependence on cash for retail and informal sector transactions.
However, the latest figures show that this upward movement has begun to taper.
The slight decline recorded in February suggests that both cash outside banks and total money circulating in the economy may be entering a period of measured adjustment.
Why Cash Still Matters in Nigeria
Even with expanding digital payment infrastructure, physical cash continues to play a critical role in Nigeria’s economic system.
A large segment of daily transactions—particularly within the informal sector—still depends heavily on cash-based exchanges.
In many communities, access to reliable banking infrastructure remains uneven, while concerns about failed transfers, delayed payment confirmations, and network disruptions continue to influence consumer behaviour.
As a result, many individuals and businesses still prefer to hold significant amounts of physical cash as a safeguard against uncertainty.
What the Latest Figures Could Mean
The latest moderation may reflect a combination of easing seasonal demand, improved liquidity management, and a gradual return to normal transaction patterns after the heavy spending cycle associated with the end of the year.
However, the broader picture remains clear: Nigeria’s appetite for cash remains structurally strong.
While February’s figures point to a short-term cooling in currency holdings, the year-on-year increase shows that cash remains deeply embedded in the country’s economic activity.
Going forward, market participants will closely monitor future CBN data to determine whether the recent decline represents the beginning of a sustained trend or merely a temporary adjustment following the seasonal surge recorded in late 2025.
