Nigerians Continue to Hoard Physical Cash Despite Digital Push
Nigerians dramatically increased their preference for physical cash in November 2025, withdrawing a net N264.48 billion from the banking system. This surge pushed the total amount of money held outside formal banking channels to a substantial N4.91 trillion. This figure represents a significant month-on-month increase from the N4.65 trillion recorded in October 2025, underscoring a persistent reliance on physical currency for daily transactions, even as efforts to promote electronic payments gain traction.
The latest money and credit statistics from the Central Bank of Nigeria reveal a broader trend: the total currency in circulation also saw an uptick in November 2025, rising to N5.26 trillion from N5.06 trillion in October. Crucially, this growth pattern means that the proportion of total currency circulating outside the formal banking sector expanded to approximately 93.34 per cent in November, up from 91.87 per cent in October. While both indicators increased, the faster expansion of cash held outside the formal banking system has consequently reduced the percentage of total notes retained within bank vaults.
On a year-on-year basis, the value of currency held outside banks saw a considerable rise of N258.75 billion compared to N4.65 trillion in November 2024. This represents a growth of roughly 5.56 per cent over the twelve-month period. Similarly, total currency in circulation during the same timeframe increased by approximately N383.67 billion, moving from N4.88 trillion in November 2024 to N5.26 trillion in November 2025, marking an approximate 7.87 per cent growth.
Interestingly, the proportion of total cash held outside banks was even higher in November 2024, standing at about 95.38 per cent. This suggests that while the absolute volume of cash outside the banking sector has grown, there has been a marginal improvement in the share of cash temporarily kept within bank custody between these two periods.
A Year of Fluctuating Cash Holdings
A detailed examination of the 2025 trends reveals a dynamic pattern in cash holdings outside banks, with the figure fluctuating throughout the year before peaking in November.
- January 2025: The year commenced with N4.74 trillion in currency outside banks, against a total circulation of N5.24 trillion. This translated to about 90.48 per cent of currency circulating outside the banking sector.
- February 2025: The value of cash outside banks saw a dip to N4.52 trillion, with total currency in circulation declining to N5.04 trillion. This resulted in a lower ratio of approximately 89.65 per cent, marking February as the weakest month in terms of cash held outside the formal financial system.
- March 2025: Cash outside banks experienced a rebound, rising to N4.60 trillion, while total currency in circulation stood at N5.00 trillion. The ratio climbed to about 91.91 per cent.
- April 2025: A slight moderation was observed, with N4.57 trillion held outside banks against N5.01 trillion in circulation, yielding a ratio of around 91.09 per cent.
- May 2025: This month saw another increase, with Nigerians holding N4.63 trillion outside banks out of a total circulation of N5.01 trillion. This recorded one of the highest ratios of the year at approximately 92.40 per cent, indicating that over nine-tenths of all currency issued by the apex bank was effectively outside the banking system.
- June 2025: The pattern shifted again as cash outside banks dropped to N4.49 trillion, despite total currency in circulation remaining around N5.01 trillion. The ratio of outside cash slipped to approximately 89.74 per cent.
- July 2025: This month remained subdued, with N4.42 trillion held outside banks and N4.92 trillion in circulation, resulting in a ratio of roughly 89.82 per cent. These mid-year figures suggested a temporary consolidation in bank cash holdings, potentially influenced by seasonal patterns or shifts in liquidity behaviour.
- August 2025: From August onwards, the numbers began to trend upwards. Cash outside banks increased to N4.45 trillion out of N4.92 trillion in circulation, translating to a ratio of about 90.41 per cent.
- September 2025: A further rise was noted, with N4.47 trillion held outside banks while currency in circulation increased to N4.95 trillion, maintaining a ratio of 90.15 per cent.
- October 2025: This month recorded a more substantial jump to N4.65 trillion held outside banks and N5.06 trillion in total circulation, with the share of cash outside banks rebounding to about 91.87 per cent, setting the stage for the sharp surge observed in November.
Across the eleven months of 2025 reviewed, the lowest absolute level of cash held outside banks was recorded in July at N4.42 trillion, while the highest was in November at N4.91 trillion. The highest proportion of cash held outside banks during this period was also in November at approximately 93.34 per cent, closely followed by May at about 92.40 per cent. The lowest percentage was observed in February at 89.65 per cent. These movements collectively highlight the enduring dominance of cash circulating outside the regulated financial system, even as the total value of currency issued by the apex bank expanded throughout the year.
Broader Liquidity and Macroeconomic Concerns
The broader liquidity environment can also be gauged by banking system reserves. Commercial bank reserves with the Central Bank stood at N27.43 trillion in January 2025, fluctuating throughout the year. They fell to N27.57 trillion in February, rose to N28.52 trillion in March, and then moderated to N29.72 trillion in April. Reserves climbed to N30.86 trillion in May before softening to N29.65 trillion in June. July and August recorded N30.43 trillion and N30.76 trillion, respectively. A significant increase was seen in September with reserves reaching N34.67 trillion, followed by a dip to N31.58 trillion in October, and a further decline to N30.94 trillion in November.
The persistent ratio of currency outside banks to total circulation, which has remained above 89 per cent throughout the year, underscores a structural challenge in Nigeria’s cash-heavy economy. This growing preference for physical cash raises several macroeconomic concerns:
- Weakened Monetary Control: High levels of out-of-bank cash can diminish the effectiveness of monetary policy tools.
- Reduced Deposit Mobilisation: Funds held outside the banking system are not available for lending or investment, potentially constraining economic growth.
- Liquidity Constraints for Banks: Banks may face challenges meeting their obligations if a significant portion of deposits are withdrawn as physical cash.
- Informal Transactions: The prevalence of cash can facilitate informal economic activities that escape regulatory oversight and taxation.
- Inflation Targeting Complications: Large cash holdings outside the formal system can blunt the impact of inflation control measures.
The sharp rise in currency outside banks comes at a critical juncture when the Central Bank of Nigeria (CBN) is focused on tightening liquidity to curb inflation. The Monetary Policy Committee (MPC) had adjusted policy parameters in September, including a decision to cut the Monetary Policy Rate by 50 basis points to 27 per cent – the first reduction since 2020. This easing move was predicated on moderating inflation and improved foreign exchange conditions.
However, at its subsequent November meeting, the MPC opted to keep the benchmark rate unchanged at 27 per cent and adjusted the policy corridor. This move was designed to discourage banks from warehousing excess liquidity at the apex bank, signalling a cautious approach to balancing economic easing with the imperative of inflation control. CBN Governor, Olayemi Cardoso, announced this decision, stating that the MPC voted by a majority to maintain the current monetary policy stance, as members believed the economy needed more time for earlier policy decisions to take full effect.
