The amount of cash held outside Nigerian banks fell to an eight-month low of N4.8 trillion in July, suggesting a gradual flow of currency back into the formal banking system.

The cash holdings weakened for the second consecutive month.

The latest Money and Credit Statistics from the Central Bank of Nigeria (CBN) showed that currency outside banks declined by N118.7 billion or 2.4 per cent, from N4.92 trillion in June.

The July figure was the lowest recorded since November 2025.

The latest movement extended a decline that began in May, when cash outside banks stood at N5.19 trillion. By July, the amount had dropped by N390 billion in two months.

The change becomes more significant when viewed against the broader position of liquidity in the financial system. While cash held outside banks declined, commercial bank reserves with the CBN rose sharply, increasing from N34 trillion in June to N36.73 trillion in July.

The N2.73 trillion, or eight per cent increase in bank reserves, indicates an increase in deposits with banks.

Currency in circulation also fell during the month, declining from N5.52 trillion in June to N5.38 trillion in July. This means the reduction was not simply a shift between cash held by banks and cash held by the public; the overall stock of physical currency in circulation also contracted.

The trend marks a reversal from the sharp build-up in cash holdings recorded towards the end of last year. Currency outside banks rose from N4.45 trillion in August 2025 to N4.91 trillion in November before reaching N5.41 trillion in December.

It started the year at N5.25 trillion and, despite some fluctuations, has since buckled. By July, it was N450.2 billion, or 8.6 per cent, below its January level.

The decline could reflect a combination of factors, including greater use of electronic payment channels, increased movement of money through bank accounts and weaker demand for physical cash. However, the CBN data alone does not establish how much of the reduction was specifically driven by digital payments.

The CBN recently set a target of reducing cash outside the banking system to below 40 per cent of total currency in circulation while seeking to raise financial inclusion among adults to 95 per cent by 2028.