The total amount of currency circulating outside Nigeria’s banking system surged to N4.6 trillion in March 2025, representing 91.9% of the N5.00 trillion total currency in circulation, according to the latest money and credit statistics from the Central Bank of Nigeria (CBN).
This reflects a sharp rise from March 2024, when N3.63 trillion was held outside banks out of N3.87 trillion in circulation. The year-on-year figures show a 26.7% increase in currency held outside the banking system and a 29.3% rise in total currency in circulation—signalling Nigeria’s enduring dependence on cash despite sustained efforts to promote a cashless economy.
The March numbers reveal a persistent trend: Nigerians continue to favour physical cash over formal banking channels. Between February and March 2025, currency outside banks increased slightly from N4.52 trillion to N4.60 trillion, even as total currency in circulation dipped marginally from N5.04 trillion to N5.00 trillion. This pushed the proportion of cash held outside banks to 91.9%—the highest level recorded in five months.
This pattern has remained steady throughout the first quarter of 2025. In January, N4.74 trillion was outside the banks, accounting for 90.5% of the N5.24 trillion in circulation. Though February saw a slight dip in that share to 89.6%, March marked a renewed upward trend.
The data suggest a deeply rooted reliance on physical currency, especially within Nigeria’s vast informal sector, which contributes more than 50% to the nation’s GDP. The preference for cash transactions is driven by a combination of behavioural habits and structural limitations—ranging from limited access to banking services and poor digital infrastructure to low levels of financial literacy and mistrust in electronic banking platforms.
Many consumers, particularly in rural and peri-urban areas, continue to express concerns over failed transfers, ATM downtimes, and unresolved transaction issues. In such an environment, physical cash remains the most trusted and readily available medium for daily transactions.
“Despite the government’s push for a cashless policy, the numbers tell a different story. People are still more comfortable holding cash in hand, especially given ongoing concerns about inflation and access to reliable banking infrastructure,” said a financial analyst familiar with the data.
The trend also mirrors rising inflationary pressure in the country. According to the National Bureau of Statistics (NBS), headline inflation climbed to 24.23% in March 2025, up from 23.18% in February. On a month-on-month basis, inflation accelerated by 3.90%—almost double February’s rate of 2.04%. In such conditions, households tend to hold more cash for immediate purchases, particularly where price volatility is high and long-term planning becomes difficult.
The high proportion of currency outside banks presents a growing challenge for monetary authorities. Traditional policy tools—such as interest rate adjustments and open market operations—become less effective when so much liquidity remains outside formal financial channels.
As the Central Bank’s Monetary Policy Committee (MPC) prepares to meet on May 19 and 20, 2025, the surge in unbanked currency and climbing inflation are expected to shape discussions.
The committee had opted to hold interest rates steady during its February meeting. However, with inflation quickening and unbanked currency at record levels, analysts now anticipate a more hawkish posture in May.
“Sterilising excess liquidity through conventional means may no longer be adequate,” a monetary policy expert warned. “If the bulk of cash is sitting outside the banks, the Central Bank may have to consider more aggressive interventions—either to mop up liquidity or reintroduce measures that drive cash back into the financial system.”
The coming months may therefore see a recalibration of Nigeria’s monetary strategy, as policymakers weigh the economic risks of unbanked liquidity against the pressing need to restore price stability.