Last Monday in an interview with BTV, Benfica president Luís Filipe Vieira discussed the effects of COVID-19 on the club.
During the interview, Vieira revealed that the club had envisaged a cash inflow of €200m for the next transfer market.
City were reportedly willing to pay the Portuguese centre-back’s €100m release clause in full.
However, the Coronavirus has hit the transfer market hard with many clubs reassessing their plans.
City may yet return for Dias, but would be less likely to pay his full release clause now.
The Citizens have underperformed in defence this season, conceding 31 goals in the Premier League, ten more than Liverpool.
Dias is one of the most highly-rated defenders in world football having risen through Benfica’s youth system to the first team.