Cash outside banks climbs to N5.19tn despite CBN’s cashless dive

By Editor

Cash held outside Nigeria’s banking system increased to N5.19tn in May, underscoring the country’s continued reliance on physical cash despite the Central Bank of Nigeria’s efforts to deepen digital payments and financial inclusion.

Latest money and credit statistics released by the CBN showed that currency outside banks rose by N109.34bn, or 2.15 per cent, from N5.08tn recorded in April.

On a year-on-year basis, cash held outside the banking system increased by N559.16bn, representing a 12.07 per cent rise from N4.63tn in May 2025.

The data indicate that a substantial share of money in circulation remains outside the formal banking sector, limiting the effectiveness of policies aimed at encouraging electronic transactions and strengthening financial intermediation.

The CBN figures also showed that total currency in circulation rose to N5.69tn in May from N5.65tn in April, an increase of N43.59bn or 0.77 per cent.

Compared with May 2025, currency in circulation expanded by N675.19bn, representing a 13.46 per cent increase from N5.01tn.

As a result, 91.27 per cent of total currency in circulation was held outside banks in May 2026, up from 90.03 per cent in April, although slightly below the 92.40 per cent recorded in the corresponding period of last year.

The trend suggests that while digital payment adoption continues to grow, Nigeria remains largely a cash-driven economy.

The development comes despite increasing usage of mobile banking, fintech platforms, agency banking services, and other electronic payment channels promoted by regulators and financial institutions.

Meanwhile, banking sector reserves declined by N840.77bn, or 2.43 per cent, to N33.76tn in May from N34.60tn in April.

However, compared with the N30.86tn recorded in May 2025, bank reserves increased by N2.90tn, reflecting a 9.39 per cent year-on-year growth and indicating stronger liquidity buffers within the banking system.

Historical data showed that currency outside banks stood at N5.41tn in December 2025 before declining to N5.25tn in January and N5.19tn in February 2026. The figure dropped further to N5.08tn in April before rebounding in May.

Analysts say persistently high levels of cash outside the banking system can weaken monetary policy transmission, constrain deposit mobilisation, and reduce banks’ capacity to extend credit to businesses and households.

To address the challenge, the CBN has unveiled an ambitious strategy to expand financial inclusion and encourage greater participation in the formal financial system.

Under the Nigeria Payments System Vision 2028, the apex bank plans to onboard an additional 50 million Nigerians into the financial system by 2028 while significantly reducing cash dependency.

CBN Governor Olayemi Cardoso said the bank aims to cut cash held outside the banking system to below 40 per cent of total currency in circulation by 2028.

“I would like to see a situation where we will reduce cash outside the banking system to less than 40 per cent of money in circulation,” Cardoso said.

The initiative is expected to improve monetary policy effectiveness, strengthen banking sector liquidity, deepen financial intermediation, and enhance the ability of lenders to support economic growth.

Despite these ambitions, the latest figures suggest that bringing more cash into the formal banking system remains a significant challenge as millions of Nigerians continue to rely heavily on physical currency for everyday transactions.