Currency held outside Nigeria’s formal banking system has surged by a striking 66.2% year-on-year, according to recent data from the Central Bank of Nigeria (CBN), reaching N4.02 trillion in September 2024, up from N2.42 trillion in September 2023—a N1.6 trillion increase in just 12 months.
The CBN’s Money and Credit Statistics report shows that, month-on-month, the volume of cash outside banks climbed 3.8% from August’s figure of N3.87 trillion, adding N147.9 billion in September. This trend reflects a marked shift in public confidence towards retaining cash outside traditional banking channels—a development that could tighten liquidity in the banking sector and reshape the country’s monetary policy landscape.
Approximately 93.1% of Nigeria’s total currency in circulation was held outside banks in September, a sharp increase from 87.5% in the previous year, indicating a growing reliance on cash in Nigeria’s informal economy. The high volume of cash held outside banks underscores deep-seated challenges: from inflationary pressures and limited trust in banking institutions to the dominance of informal transactions.
Overall currency circulation—both in and outside banks—rose by 56.1% year-on-year, from N2.76 trillion in September 2023 to N4.31 trillion in 2024, reflecting an increase of N1.55 trillion. The data shows that currency outside banks is growing faster than the total cash circulating, suggesting a steady withdrawal of funds from formal channels. Month-on-month, currency in circulation also grew by 4%, adding N166.2 billion from August’s figure of N4.14 trillion.
In response, the CBN announced that banks failing to keep automated teller machines stocked with cash could face sanctions, alongside plans to release N1.4 trillion over the next three months to improve cash flow within the banking system. The goal is to address ongoing cash shortages faced by customers at bank branches and ATMs.
However, the rise in currency outside banks reflects broader shifts in Nigeria’s money supply, which expanded 62.8% year-on-year despite the Monetary Policy Committee’s attempts to curb inflation by controlling excess liquidity. M3 money supply—a measure of the total money in the economy—reached N108.95 trillion in September 2024, up from N66.94 trillion the previous year. This 1.6% monthly rise from August’s N107.19 trillion highlights a complex balancing act between bolstering cash availability and reining in inflation.
As currency increasingly remains outside Nigeria’s banking system, the implications for economic stability, monetary policy, and future growth remain profound, underscoring the need for deeper reforms in trust and accessibility within the financial sector.
