Nigeria’s currency in circulation surges to N5.24 trillion, with 90.5% held outside banks 

The latest data from the Central Bank of Nigeria (CBN) also revealed that N4.74 trillion, or 90.5% of this total, was outside the banking system, held by individuals and businesses instead of being stored in bank vaults.

Despite the push for digital transactions, cash usage continues to rise, with a steady increase in the volume of money circulating outside formal banking channels.

However, the CBN did not provide figures for December 2024, making it difficult to determine the full extent of cash movement during the peak holiday season.

The growing dominance of cash outside the banking system presents multiple challenges for financial institutions and economic policymakers.

With over 90% of total cash held outside banks, deposit mobilization for banks remains weak, affecting their ability to extend credit to businesses and individuals.

Since banks rely on deposits to fund loans and investments, this trend could limit lending activities and economic growth.

Monetary policy effectiveness is also at risk. The CBN uses tools like open market operations and interest rate adjustments to control liquidity and inflation.

However, when most cash remains outside the banking system, these measures become less effective in managing inflation and stabilizing the economy.

The continued preference for cash transactions, despite efforts to promote digital banking, highlights the slow pace of financial inclusion.

Many Nigerians, especially in the informal sector, still rely heavily on cash due to limited access to banking services and POS infrastructure challenges. The persistent reliance on cash could also contribute to inflationary pressures, particularly if excess liquidity in the system is not matched by a corresponding rise in goods and services.