Cash Outside Banks Drops To N4.45tn - CBN

Cash held outside Nigeria’s banking system dropped to N4.45tn in August 2025, the lowest level recorded so far this year, according to data from the Central Bank of Nigeria’s Money and Credit Statistics.

The amount fell by N41.1bn (0.9 per cent) from N4.49tn in June 2025, and by N180bn (3.9 per cent) from the year’s peak of N4.63tn in May.

In August, total currency in circulation stood at N4.92tn, indicating that 90.5 per cent of all cash issued by the CBN was held outside the banking system.

Throughout 2025, the figures have fluctuated but remained consistently high. In January, cash outside banks was N4.74tn (90.5 per cent of N5.24tn in circulation).

February declined to N4.52tn (89.6 per cent), March climbed to N4.60tn (91.9 per cent), and April recorded N4.57tn (91.1 per cent).

May saw the highest level of the year at N4.63tn (92.4 per cent of N5.01tn), while June dropped to N4.49tn (89.8 per cent) before August’s N4.45tn (90.5 per cent).

Even at its lowest point, more than nine out of every ten naira in circulation remained outside bank vaults.

Year-on-year data shows a sharp increase: in August 2024, cash outside banks was N3.87tn, meaning August 2025 was higher by N585bn (15.1 per cent).

Currency in circulation also rose from N4.14tn to N4.92tn in the same period an increase of N778bn (18.8 per cent).

The gap is even clearer when comparing January figures. In January 2024, N3.28tn was outside banks, but by January 2025, it had surged to N4.74tn, a jump of N1.46tn (44.5 per cent).

Every month of 2025 has surpassed 2024 by large margins: February by N1.11tn, March by almost N1tn, April by N963bn, May by N923bn, June by N704bn, July by N829bn, and August by N585bn.

The ratio of cash outside banks to total currency highlights a structural challenge.

In August 2024, 93.3 per cent of cash was outside banks, compared to 90.5 per cent in August 2025.

Although the ratio is slightly lower, the absolute amount in 2025 is significantly higher.

Between January and August 2025, an average of 90.8 per cent of all cash issued was outside the banking system, compared with 92.4 per cent in the same period of 2024.

The average cash stock outside banks in 2025 stood at N4.57tn, almost N1.55tn higher than the 2024 average of N3.62tn.

These trends have important implications for the CBN’s monetary tightening measures.

For most of 2025, the apex bank held the Monetary Policy Rate at 27.50 per cent to curb inflation and stabilise the naira.

The August decline may reflect the early impact of stricter cash management and rising digital payment adoption, though excess liquidity remains entrenched.

In September 2025, the Monetary Policy Committee implemented its first rate cut since 2020, reducing the policy rate to 27 per cent.

The decision followed signs of easing inflation, which dropped to 20.12 per cent in August, and the need to support economic growth.

The committee also reduced the Cash Reserve Ratio for commercial banks from 50 to 45 per cent while increasing the reserve ratio on public sector deposits to 75 per cent.

A broader continental trend supports this shift. Ghana recently lowered its policy rate by 350 basis points to 21.5 per cent, while Kenya cut its benchmark rate to 9.5 per cent in mid-August.

Nigeria’s MPR remains one of the highest in Africa, underscoring persistent inflationary pressures.

Nonetheless, the move signals a cautious pivot from crisis management to measured economic stimulus.

The CBN has previously warned that monthly allocations from the Federation Account Allocation Committee (FAAC) contribute to excess liquidity, threatening price stability.

Speaking after the 302nd MPC meeting in Abuja, Governor Olayemi Cardoso said the apex bank is closely tracking fiscal injections from FAAC disbursements.

“We are a bit concerned about excess liquidity and, in particular, the negative effects of FAAC releases at certain times of the month or year.

It is something that we are watching very closely, and we will continue to deploy the tools required to ensure that the stability we have attained stays with us into the future,” Cardoso said.