- The Central Bank of Nigeria said 90.5 per cent of the currency in circulation is outside the banking system
- There was a consistent increase in both total currency in circulation and cash held outside banks throughout 2024
- The trend shows high reliance on cash and has economic implications
The latest data from the Central Bank of Nigeria (CBN) shows that 90.5 per cent of the N5.24 trillion currency in circulation in Nigeria is outside the banking system as of January 2025.
The data stated that Nigeria’s total currency in circulation surged to N5.24 trillion in January 2025, representing a 43.4 per cent increase from N3.65 trillion in January 2024.
The 90.5 per cent of the currency in circulation outside the banking system represents N4.74 trillion and raises concern over cash hoarding despite efforts to promote digital transactions and reduce reliance on physical cash.
The CBN did not provide figures for December 2024, making it difficult to assess the full impact of seasonal spending on cash circulation given that the country typically records a surge in withdrawals in December due to increased spending on travel, celebrations, and informal sector transactions.
Currency in circulation trend in 2024
An analysis of the data shows a consistent increase in both total currency in circulation and cash held outside banks throughout 2024.
In January 2024, currency in circulation stood at N3.65 trillion, with N3.28 trillion or 89.9 per cent outside banks. Total currency increased to N3.69 trillion in February, with N3.41 trillion or 92.5 per cent outside the banking system.
The trend continued in March with N3.87 trillion in circulation and N3.63 trillion held outside banks. In April, currency held outside banks declined to N3.61 trillion or 92 per cent out of the N3.92 trillion total currency in circulation.
May saw an upward trajectory as currency in circulation increased to N3.97 trillion, with N3.71 trillion outside banks. The trend continued in June, with currency in circulation increasing to N4.05 trillion, while N3.79 trillion, representing 93.58 per cent, held outside the formal banking system.
Total currency remained at N4.05 trillion in July, while currency outside banks saw a drop to N3.67 trillion or 90.6 per cent. In August, both metrics recorded an increase with currency in circulation growing to N4.14 trillion, while N3.87 trillion was held outside banks.
In September 2024, total currency in circulation stood at N4.31 trillion, while N4.02 trillion was outside banks. The figures further rose in October with currency in circulation reaching N4.55 trillion out of which N4.29 trillion was held outside banks.
Total currency in circulation surged to N4.88 trillion in November with N4.65 trillion outside banks. There was no figure for December 2024 before the figures reached a new peak of N5.24 trillion in circulation in January 2025 and N4.74 trillion or 90.4 per cent outside banks.
Economic implication of high currency outside banking system
The trend of a high proportion of currency outside banks suggests a greater reliance on cash, which can be attributed to the lack of trust in the banking system, limited financial access in rural areas, and frequent technical issues with digital payment platforms.
With a high volume of cash outside banks, the financial sector and economic policymakers face the challenge of weak deposit mobilisation, hampering banks’ ability to provide loans and credit to businesses.
This will also result in decreased economic growth and slow business expansion as banks typically depend on customer deposits to fund lending and investments.
On the part of monetary policymakers, the trend presents a challenge as the CBN relies on tools such as open market operations and interest rate adjustments to manage liquidity and inflation.
With a large portion of cash outside the banking system, these measures become less effective, making it harder to control inflation and stabilise the economy.
The increased reliance on cash could further drive inflation if liquidity levels rise without a corresponding increase in goods and services.
CBN says 94.3% of currency in circulation outside banks in October 2024
Meanwhile, TheRadar earlier reported that the Central Bank of Nigeria (CBN) said 94.3 per cent of the currency in circulation was outside the banking system, despite a year-on-year increase of N1.59 trillion in the amount of currency held outside banks.
According to CBN’s Money and Credit Statistics, cash outside banks reached N4.29 trillion in October 2024, representing 94.3 per cent of the total of N4.55 trillion currency in circulation.
