Nigerian banks accumulated more liquidity in the first four months of 2026, but lending to businesses saw a major decline despite the Central Bank of Nigeria’s decision to lower interest rates earlier this year, new CBN data has shown.
Figures released by the CBN in its money and credit statistics showed that the broad money supply rose to N124.99 trillion in April 2026 from N123.12 trillion in February, indicating that liquidity in the financial system continued to expand.
The increase came after the Monetary Policy Committee reduced the Monetary Policy Rate by 50 basis points to 26.5 per cent in February, marking the first rate cut after months of aggressive monetary tightening aimed at slowing inflation and stabilising the naira.
However, despite rising liquidity and growing deposits within the banking system, credit to the private sector weakened significantly. The CBN data showed that credit to the private sector fell to N80.59 trillion in April from N94.61 trillion in February.
The figures show a decline of about N14.02 trillion within two months, one of the sharpest contractions recorded in recent periods.
Although there were no explanations for the movement in the statistics, the data suggests banks may have become more cautious in lending to businesses amid high borrowing costs, economic uncertainty and attractive yields on government securities.
At the same time, credit to the government increased to N39.60 trillion in April from N39.36 trillion in February and N37.87 trillion in January. The development may raise concerns that government borrowing is increasingly attracting banking-sector liquidity that could otherwise support private-sector activity.
Liquidity rises
The data also showed that net domestic assets rose to N100.97 trillion in April from N97.55 trillion in February. Reserve money, also known as base money, climbed sharply to N40.25 trillion in April from N38.45 trillion in February and N35.99 trillion in January.
Banks’ reserves also increased strongly to N34.60 trillion in April from N32.74 trillion in February. Demand deposits rose to N38.67 trillion in April from N38.35 trillion in February, indicating that more liquidity remained within the banking system.
Quasi money, which includes savings and fixed deposits, also increased to N81.22 trillion in April from N79.57 trillion in February. The rise reflects continued appetite for high-yield financial assets such as Treasury bills, fixed deposits and other interest-bearing instruments as rates remain elevated.
The CBN retained the benchmark interest rate at 26.5 per cent at its May MPC meeting, maintaining what the apex bank’s governor, Olayemi Cardoso, described as a cautious stance aimed at preserving macroeconomic stability and controlling inflation.
Cash outside banks falls
The figures also showed that currency outside banks declined further to N5.08 trillion in April from N5.25 trillion in January. Currency in circulation fell slightly to N5.65 trillion in April from N5.73 trillion in January.
The trend may suggest that more money remained within the formal banking system rather than circulating as physical cash.
This may also reflect rising digital payment adoption, stronger bank deposit mobilisation, and reduced speculative cash holding following relative stability in the foreign exchange market earlier in the year.
Foreign assets decline
Despite the increase in domestic liquidity, the country’s net foreign assets continued to weaken. Net foreign assets fell to N24.01 trillion in April from N27.09 trillion in January.
The decline points to continued pressure on external balances and reflects the cost of efforts to support naira stability in the foreign exchange market.
While liquidity within the banking system continued to rise, the fall in private-sector credit may suggest that businesses are still struggling to access financing despite signs of easing monetary conditions.
