CBN rate cut draws N105bn cash back into banking system

Cash held outside Nigeria’s banking system dropped by N104.76bn between February and April 2026, following a reduction in interest rates by the Central Bank of Nigeria (CBN).

Data from the apex bank showed that currency outside banks declined from N5.19tn in February—when the Monetary Policy Rate was cut to 26.5 per cent—to N5.08tn in April, representing a 2.02 per cent decrease. March figures were not released, limiting month-on-month comparison.

Total currency in circulation also fell slightly, dropping by N63.46bn from N5.71tn to N5.65tn over the same period. The share of cash held outside the banking system eased to 90.03 per cent in April, down from 90.87 per cent in February and 94.33 per cent in December 2025.

The trend indicates that a modest portion of cash returned to the banking system after the February rate cut. Compared to December 2025, currency outside banks declined by N324.16bn, or 5.99 per cent.

Despite this improvement, cash usage remains high. On a year-on-year basis, currency outside banks rose by N515.58bn from N4.57tn in April 2025 to N5.08tn in April 2026, while total currency in circulation increased by 12.6 per cent to N5.65tn.

Meanwhile, bank reserves with the CBN rose significantly, climbing from N32.74tn in February to N34.60tn in April—an increase of N1.86tn or 5.68 per cent. Year-on-year, reserves grew by 16.43 per cent, reflecting stronger liquidity buffers within the banking sector.

The rate cut, announced at the 304th Monetary Policy Committee meeting in Abuja, reduced the benchmark rate by 50 basis points from 27 per cent to 26.5 per cent.

Despite the dip in cash circulation, Nigeria’s broad money supply expanded to N124.99tn in April 2026 from N123.12tn in February, driven largely by growth in net domestic assets, which rose to N100.97tn.

Overall, the data highlights a slight shift toward greater liquidity within the banking system, even as cash transactions continue to dominate the economy.