More than 91 per cent of Nigeria’s physical currency remained outside the banking system in May, underscoring the enduring dominance of cash transactions despite sustained efforts to deepen digital payments and financial inclusion.
Latest Money and Credit Statistics released by the Central Bank of Nigeria (CBN) showed that currency outside banks rose to N5.19 trillion in May from N5.08 trillion in April, representing an increase of N109.34 billion, or 2.15 per cent, within one month.
The figure was also N559.16 billion higher than the N4.63 trillion recorded in May 2025, reflecting a year-on-year increase of 12.07 per cent.
However, the more significant indicator is the proportion of cash held outside the formal banking system.
According to the CBN, currency outside banks accounted for 91.27 per cent of total currency in circulation in May, up from 90.03 per cent in April. This means more than N9 out of every N10 in circulation was held by households, businesses and participants in the informal economy rather than deposited with banks.
The data highlights the persistence of a cash-driven economy despite rapid growth in mobile banking, instant payment platforms, agent banking networks and fintech services.
Analysts say the figures reflect the continued importance of the informal sector, where transactions in retail trade, transportation, agriculture and small-scale commerce are still largely conducted in cash.
The trend suggests that while digital payment adoption is expanding, it is occurring alongside, rather than replacing, the use of physical cash.
The CBN data also showed that total currency in circulation increased to N5.69 trillion in May from N5.65 trillion in April, representing a monthly rise of N43.59 billion, or 0.77 per cent.
On an annual basis, currency in circulation grew by N675.19 billion, or 13.46 per cent, from N5.02 trillion recorded in May 2025.
The growing share of cash outside banks has implications for the financial system, particularly in relation to liquidity mobilisation and monetary policy transmission.
Funds held outside the banking sector reduce the deposit base available to financial institutions and limit the volume of resources available for lending and other productive activities.
Reflecting this dynamic, reserves held by banks with the CBN declined from N34.60 trillion in April to N33.76 trillion in May, a decrease of N840.77 billion, or 2.43 per cent.
Although bank reserves remained 9.39 per cent higher than the N30.87 trillion recorded in May 2025, the decline coincided with rising cash holdings outside the banking system.
The figures come as the apex bank pursues ambitious targets under its Payment System Vision (PSV) 2028 programme.
CBN Governor, Olayemi Cardoso, recently said the initiative seeks to accelerate Nigeria’s transition to a more inclusive and technology-driven payments ecosystem.
A key target is to reduce currency outside banks to below 40 per cent of total currency in circulation. However, with the current ratio exceeding 91 per cent, the latest data underscores the scale of the challenge facing policymakers in reducing the economy’s dependence on cash.