Nigeria’s economy remains stubbornly cash-dependent, with an overwhelming majority of physical currency circulating outside the formal banking system, new data from the Central Bank of Nigeria reveals.
In November 2025, a staggering N4.91 trillion out of N5.26 trillion in total currency—roughly 93.35%—was held outside banks, according to the CBN’s latest money and credit statistics. The figures underscore a deepening trend that has now persisted for nearly two years, raising questions about financial inclusion, monetary policy effectiveness, and the resilience of Nigeria’s informal economy.
The numbers tell a consistent story. Throughout 2025, more than nine out of every ten naira notes in circulation never touched a bank vault. The share of cash outside banks remained above 89% for the entire year, climbing from 90.49% in January to the year’s peak in November.
This isn’t a new phenomenon. The pattern has held firm since early 2024, suggesting that Nigerians’ preference for keeping cash outside the banking system has become a structural feature of the economy rather than a temporary response to any single policy measure.
Month-to-month movements show subtle but telling shifts. The ratio dipped slightly in February to 89.62%, then climbed steadily through the second and third quarters. By August and September, it had crossed back above 92% before settling at 93.35% in November—the highest level recorded all year.
Total currency in circulation reached N5.26 trillion in November 2025, marking the year’s highest level and a notable increase from N4.88 trillion in November 2024. That represents approximately N383.7 billion in additional cash pumped into the economy over twelve months.
The steady climb in physical cash—from a low of N4.92 trillion in August and September to November’s peak—points to intensifying transactional demand as Nigerians grappled with inflationary pressures and year-end spending surged. Yet despite this growing cash supply, banks captured virtually none of it. The proportion of currency held within the formal banking system remained trapped in a narrow 6-10% band throughout the year.
While cash fled the banking system, a different dynamic played out in bank reserves. Reserves held at the CBN climbed sharply, rising from N25.99 trillion in November 2024 to N30.94 trillion in November 2025—an increase of nearly N5 trillion.
The contrast is striking: bank reserves grew by N5 trillion year-on-year, while currency in circulation expanded by less than N400 billion. This divergence suggests aggressive liquidity management by the central bank, likely through higher cash reserve requirements and sterilization operations that effectively locked up bank funds.
For Nigeria’s banking sector, the implications are significant. With more capital tied up at the CBN, banks have less room to extend credit to businesses and consumers. This reserve lock-up contributes to rising funding costs and puts upward pressure on lending rates—a bitter pill for enterprises already struggling with steep borrowing costs in a high-inflation environment.
Where did all that cash go? The informal economy, analysts say. Physical currency continues to lubricate the gears of Nigeria’s vast informal sector—flowing through market stalls, transport systems, household transactions, and small-scale enterprises that operate largely beyond the reach of formal financial institutions.
Deposit mobilization efforts appear to have made little headway. Despite various financial inclusion initiatives, the recycling of physical cash back into the banking system remains minimal. The persistence of this pattern suggests deep-rooted factors at play: limited trust in banks, inadequate banking infrastructure in rural areas, high transaction costs, and a cultural preference for cash transactions.
The CBN’s data paints a picture of an economy operating on parallel tracks—a formal banking system awash with reserves but starved of deposits, and an informal sector swimming in physical cash but disconnected from institutional finance.
For policymakers, the challenge is clear but complex. How can Nigeria strengthen financial inclusion when the overwhelming majority of citizens prefer to transact outside the banking system? How can monetary policy be effectively transmitted when most money never enters formal channels? And how can credit expansion support economic growth when banks are simultaneously pressured to maintain high reserves while competing for a shrinking pool of deposits?
As 2026 begins, these questions remain unresolved. What’s certain is that Nigeria’s cash economy shows no signs of fading—and the gap between the formal and informal financial worlds continues to widen.
WHAT YOU SHOULD KNOW
Nigeria’s banking system is losing the battle for cash. Nearly 93% of all physical currency—N4.91 trillion out of N5.26 trillion—now circulates entirely outside banks, a two-year trend that shows no signs of reversing.
While the Central Bank has tightened its grip on bank reserves, locking up an additional N5 trillion in twelve months, this hasn’t translated into greater financial inclusion. Instead, it’s created a troubling paradox: banks are cash-starved despite rising currency in circulation, limiting their ability to lend, while the informal economy absorbs virtually all new money supply.
