Currency held outside Nigeria’s banking system declined for the second time in 2025, falling to N4.57tn in April from N4.60tn in March, according to new data from the Central Bank of Nigeria.
This renewed decline comes amid the apex bank’s continued hold on its benchmark Monetary Policy Rate at 27.5 per cent, a decision made during its May 2025 Monetary Policy Committee meeting.
Although the April figure still represents a 26.8 per cent year-on-year rise compared to the N3.61tn recorded in April 2024, the month-on-month decline of N26.4bn is considerable.
It marks a return to the downward path seen earlier in the year. It reinforces subtle shifts in Nigeria’s cash management dynamics, possibly in response to monetary tightening and increasing adoption of digital financial channels.
The downturn in currency outside banks began following the December 2024 festive season, when the figure peaked at N5.13tn, the highest level recorded in recent years. This seasonal surge, typical for year-end transactions, was quickly followed by a sharp decline in January 2025 to N4.74tn.
February saw the steepest drop in the year so far, falling to N4.52tn as post-holiday spending waned and monetary controls took firmer hold. March brought a temporary reversal, with currency outside banks ticking up slightly to N4.60tn, but by April that rebound had reversed and the total fell again to N4.57tn.
The April decline is especially relevant because it suggests the March rise was transitory rather than a sustained shift in trend. From December to April, currency outside banks has declined by N555bn or 10.8 per cent, a strong indication that the central bank’s liquidity management tools are having an effect, particularly in curbing excess cash within the informal economy.
While the amount of currency outside banks is rising year-on-year, the composition of cash within the financial system is gradually changing. In April 2025, total currency in circulation stood at N5.01tn, of which N4.57tn, or 91.1 per cent, was outside banks.
This is down from 91.9 per cent in March 2025 and also slightly lower than the 91.9 per cent recorded in April 2024, despite the higher overall volume of cash in the system.
Although the shift may appear marginal, it is directionally significant. The percentage of cash residing within deposit money banks has increased, however slightly, suggesting that efforts to promote financial intermediation may be yielding early results.
The implication is that more Nigerians are either depositing cash into the formal banking system or shifting to non-cash alternatives such as mobile money, point-of-sale channels, or electronic transfers.
Even with over 91 per cent of total cash still outside the banking system, the data signals the beginnings of behavioural change that could support the CBN’s broader digital financial inclusion goals. The decline in cash held outside the formal banking system appears to align with the recent cooling inflation trend.
As money growth slows and excess liquidity is reined in, demand-side pressures could subside further, allowing the CBN to maintain its hawkish stance without additional tightening for now.
The reduced availability of physical cash, especially outside the banking system, may also reflect the public’s sensitivity to interest rate conditions and the rising cost of cash-based transactions.
Still, challenges remain. The dominance of cash outside banks, over 91 per cent, is one of the highest globally and poses a real hurdle to monetary policy effectiveness, fiscal traceability, and anti-corruption enforcement.
