The total value of currency outside Nigeria’s banking system rose to N4.6 trillion in March 2025, accounting for 91.9% of the N5.00 trillion in total currency in circulation during the period.
This is according to the latest money and credit statistics released by the Central Bank of Nigeria (CBN), highlighting the country’s sustained dependence on physical cash despite the government’s cashless policy push.
This marks a significant increase compared to the same period in 2024, when N3.63 trillion was held outside banks out of N3.87 trillion in circulation.
The new figures represent a 26.7% year-on-year increase in currency held outside banks and a 29.3% rise in total currency in circulation.
The increased circulation of physical cash coincides with rising inflationary pressure. According to the National Bureau of Statistics (NBS), headline inflation rose to 24.23% in March, up from 23.18% in February 2025. On a month-on-month basis, inflation surged by 3.90%—nearly double February’s rate of 2.04%—signalling an accelerated rise in consumer prices.
In an inflationary environment, more Nigerians tend to keep cash in hand to meet immediate needs, especially where price volatility is high and access to banking infrastructure is unreliable. This is particularly evident in rural and peri-urban areas, as well as among informal businesses, traders, and low-income households that transact largely in cash.
Nigeria’s informal economy—estimated to contribute over 50% of GDP—relies heavily on physical cash. Limited digital literacy, poor network infrastructure, and lack of trust in banking platforms contribute to the continued preference for cash. Many consumers still perceive bank transfers as unreliable, citing delays, failed reversals, and ATM downtimes as daily frustrations.
Despite fintech growth and policy support for electronic payments, physical currency remains deeply embedded in the economic and cultural fabric of Nigerian society. Without significant progress in building trust, expanding infrastructure, and financial education, the push toward a cashless economy may remain elusive.
The high volume of unbanked currency presents a growing challenge for monetary policy implementation.
Sterilising excess liquidity through conventional means may not be sufficient if the bulk of currency remains outside the financial system. This could force the apex bank to consider more aggressive measures to mop up liquidity or reintroduce controls to push more cash into the banking sector.