Cash Levels Ease as Banks Claw Back Liquidity
The Central Bank of Nigeria has finally begun to coax cash back into the vaults. Fresh data show that currency outside banks (COB) fell for the second month straight, hitting N5.19 trillion in February 2026. This dip follows a long, stubborn climb where Nigerians seemed to prefer under-mattress storage to savings accounts. Bankers will view this modest retreat from January’s N5.21 trillion as a sign that their tightening grip is starting to work. The trend suggests that the extreme liquidity glut seen at the end of last year may have peaked.
Currency in circulation followed a similar path, easing to N5.71 trillion in February. This move marks a clear break from the aggressive expansion that defined most of 2025. Last year, the total cash floating in the economy grew almost every month as trust in digital channels faltered. Now, the tide appears to be turning, albeit slowly. The central bank is desperate to mop up this excess money to curb inflation. These numbers offer the first real evidence that the regulator is winning the tug-of-war with the informal economy.
Despite this progress, the banking system is not yet out of the woods. The current cash hoard remains far higher than the N4.51 trillion recorded this time last year. This annual increase shows how deeply Nigerians still rely on physical notes for daily survival. Even with higher interest rates, many citizens choose the certainty of cash over the convenience of a bank app. Structural demand for paper money stays high because the cost of living keeps rising. People keep more cash on hand simply because goods cost more than they did twelve months ago.
The road to this peak was paved with a mix of fear and seasonal greed. Cash levels hit a record N5.40 trillion in December 2025 as holiday spending met a general lack of faith in electronic switches. During that period, the banking system struggled to process the surge in digital hits. This failure drove many back to the safety of the banknote. The current decline suggests that some of that seasonal heat has cooled off. However, the drop is less of a crash and more of a slow leak.
Recent policy efforts to deepen digital payments are fighting a tough battle against old habits. Hoarding became a national pastime in mid-2025 when cash outside banks first crossed the N5 trillion mark. While the central bank wants a cashless society, the reality on the street remains firmly rooted in paper. Precautionary saving in cash is a rational response to an unpredictable economy. If the banks want this money back, they must prove they can move it reliably. For now, the regulator is likely satisfied that the numbers are at least moving in the right direction.
The next few months will reveal if this is a true shift or a temporary lull. A sustained drop in currency outside the formal system would give the central bank more room to breathe. It would suggest that liquidity is finally flowing through channels where it can be measured and managed. Until then, the N5.19 trillion still sitting in pockets and shops represents a massive shadow economy. The editor’s view is that while the fever has broken, the patient is still carrying a heavy load. Victory in the war on excess cash remains a distant prospect.