Currency Outside Banks Hits N4.49trn, Dominates 90% of Circulation Amid Economic Struggles

Nigeria’s financial system continues to wrestle with the dominance of cash circulating outside the banking system, even as the Central Bank of Nigeria (CBN) intensifies efforts to deepen financial inclusion.

Fresh data from the apex bank shows that currency outside banks (CoB) stood at N4.49 trillion in June 2025, slightly down from N4.63 trillion in May. Despite the decline, cash outside the formal system still accounted for an overwhelming 90 per cent of total currency in circulation (CIC), which closed the month at N5.01 trillion.

This marks the first notable easing in two months, but analysts warn the numbers highlight a deeper structural issue. Over the past year, Nigerians’ preference for cash has remained strong. CoB rose from N3.79 trillion in June 2024 to a record N5.13 trillion in December 2024, driven largely by festive season spending. Between July and November 2024, cash held outside banks climbed steadily “from N3.66 trillion in July to N4.65 trillion in November” underscoring the economy’s heavy dependence on physical money.

In early 2025, liquidity conditions appeared to shift. CoB dropped to N4.74 trillion in January and further to N4.52 trillion in February before stabilizing around current levels. Yet the dominance of cash points to weak confidence in the financial system and limited uptake of digital payment options.

Why Nigerians Still Prefer Cash

Experts point to several reasons for the persistence of cash dominance:

• Trust Deficit: Many households and businesses see cash as more reliable, given frequent network failures and disputes in digital transactions.
• Inflation and Low Returns: With deposit rates often trailing inflation, the incentive to keep money in banks remains low.
• Informal Economy: A large share of businesses operate outside the tax net and find cash easier to use.
• Infrastructure Gaps: Agent liquidity challenges and poor connectivity in rural areas discourage digital adoption.

Lessons from Other Countries

Other emerging markets have faced similar challenges but managed to tilt the balance:

• India: The breakthrough came through the Unified Payments Interface (UPI), which offered instant, low-cost transfers and scaled QR-code acceptance.
• Kenya: M-Pesa succeeded by building reliable agent networks and embedding mobile money in everyday use such as transport and utilities.
• Ghana: Policymakers learned that overtaxing digital transactions can slow adoption, as seen with its mobile money levy.

Analysts say Nigeria can draw from these experiences by ensuring reliability of digital rails, reducing costs for small-value transactions, strengthening agent networks, and improving consumer protection through faster dispute resolution.

The Way Forward

Celestine Ukpong, an economist believe addressing Nigeria’s “cash gravity” requires a mix of policy and practical reforms. These include:

• Guaranteeing reliable transaction uptime across payment platforms.
• Expanding zero-cost or low-cost micro-payments for small businesses.
• Improving liquidity for cash-in/cash-out agents in rural areas.
• Strengthening consumer protection with faster refunds and dispute resolution.
• Digitizing everyday payments such as transport fares, utilities, and market levies.

Bottom Line

The slight decline in June is not enough to shift the balance. With N4.49 trillion still circulating outside banks, cash continues to dominate Nigeria’s economy and blunt the effectiveness of monetary policy.

Until digital transactions become cheaper, more reliable, and visibly safer than cash, experts warn the CoB trend will persist—limiting progress toward a truly cashless economy.

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