Nigerians held N4.47 trillion in cash outside the banking system in September 2025, despite a contraction in overall money supply, according to the Central Bank of Nigeria’s latest money and credit statistics.
The data show that broad money supply (M3) fell to N117.78 trillion in September from N119.69 trillion in August, representing a decline of N1.91 trillion or 1.6% month-on-month.
In contrast, cash outside banks rose marginally by N14.7 billion, or 0.3%, during the same period.
On a yearly basis, money supply rose by 7.6%, climbing from N109.41 trillion in September 2024. However, cash outside banks expanded even faster, increasing by 11.2% from N4.02 trillion in the same month last year. The widening gap shows that Nigerians are increasingly holding physical money rather than keeping it in deposit accounts.
Currency in circulation refers to the total cash issued by the CBN and available to the public. In September 2025, total currency in circulation stood at N4.95 trillion. Of this amount, N4.47 trillion was held outside banks, accounting for 90.2% of the total. This means that only about 9.8% of the total cash stock was retained in bank vaults.
This persistent reliance on physical money reflects structural weaknesses in Nigeria’s financial system. It may be due to high transaction costs, distrust in the banking sector, limited penetration of digital platforms, and the dominance of informal economic activity as reasons why so much cash remains outside banks.
The monthly trajectory of cash outside banks throughout 2025 highlights the stubbornness of the trend. In January, Nigerians held N4.74 trillion, representing 90.4% of the N5.24 trillion in circulation at the time. February saw a decline to N4.52 trillion, or 89.7%, before the figure rebounded in March to N4.60 trillion.
This volatility in absolute figures has not shifted the underlying reality: over nine-tenths of currency in circulation continues to sit outside the formal banking system. The data underline that cash hoarding is driven less by liquidity changes and more by entrenched behavioural and structural preferences.
The September figures were released slightly over a month after the CBN made a historic move by cutting the Monetary Policy Rate by 50 basis points to 27.0%, its first reduction in five years. The rate cut was aimed at easing borrowing costs, but it was paired with liquidity-tightening measures, including placing the Cash Reserve Requirement for commercial banks at 45% and imposing a 75% reserve ratio on non-TSA public sector deposits.
The combination of these policies meant that while interest rates fell marginally, the ability of banks to extend credit was restricted. This may have contributed to the continued rise in cash held outside banks, as households and businesses opted to keep funds in liquid form rather than place them in deposits subject to higher costs and limited returns.
However, there is a risk of high levels of cash outside banks reducing the effectiveness of monetary policy. They weaken the transmission of interest rate adjustments, fuel the informal economy, and constrain tax collection. For the CBN, the data show that even with tighter monetary control, behavioural and structural factors are keeping cash hoarding elevated.