Currency held outside the formal banking system in Nigeria surged to a record ₦5.4 trillion by the end of December 2025, the Central Bank of Nigeria (CBN) has revealed in its latest Money and Credit Statistics report.
Nairametrics
Key Highlights Record Cash Holdings:
The amount of physical currency stored outside deposit money banks reached an unprecedented ₦5.4 trillion, underscoring a rising preference for cash holdings among individuals and businesses across the country.
Month-on-Month Growth: This figure represents a 10.2% increase from ₦4.9 trillion in November 2025.
Money Supply Expansion: Nigeria’s overall money supply (M²) climbed to ₦124.4 trillion in December 2025 from ₦122.9 trillion in November, reflecting broader liquidity growth in the economy.
Components of Growth: Narrow money (M¹) expanded by 4.05% month-on-month, driven largely by demand deposits and currency outside banks.
Economic Implications Analysts say the sustained rise in currency outside banks’ cash held by the public rather than parked in formal financial institutions highlights persistent liquidity preference for physical money in Nigeria’s largely informal economy.
Despite the increasing adoption of digital payment solutions, many Nigerians continue to rely heavily on cash for everyday transactions.
However, the trend raises concerns among policymakers about the challenges it poses for effective monetary policy implementation and financial inclusion efforts.
When large amounts of money remain outside the banking system, it can weaken central bank control over money supply dynamics and limit the ability of financial institutions to mobilize deposits for productive lending.
Analyst View Some economists point to the informal sector’s dominance, limited trust in formal banking channels, and cultural preferences for cash as driving factors behind this phenomenon.
Others argue that rising cash holdings could reflect a cautious stance by households and businesses amid economic uncertainty.
Image Credit: Nairametrics
Source : Nairametrics
