Cash outside banks rises to N5.19trn despite cashless economy

The amount of cash held outside Nigeria’s banking system increased to N5.19 trillion in May 2026, highlighting the continued reliance on cash transactions despite years of efforts to promote a cashless economy.

Latest data released by the Central Bank of Nigeria (CBN) showed that currency outside banks rose from N5.08 trillion in April to N5.19 trillion in May, representing a month-on-month increase of N109.34 billion or 2.15 per cent.

The trend comes as authorities intensify efforts to deepen electronic payments and strengthen the cashless policy, which was introduced to encourage digital transactions, enhance financial inclusion, reduce cash-handling costs and improve transparency in the financial system.

On a year-on-year basis, cash held outside banks increased by N559.16 billion from N4.63 trillion recorded in May 2025, reflecting a 12.07 per cent rise.

The figures suggest that a substantial portion of currency injected into the economy continues to remain outside formal banking channels, despite the rapid expansion of digital payment platforms, mobile banking, point-of-sale transactions and fintech services.

Further analysis of the CBN’s Money and Credit Statistics showed that total currency in circulation rose to N5.69 trillion in May 2026 from N5.65 trillion in April, indicating a monthly increase of N43.59 billion or 0.77 per cent.

Compared with N5.02 trillion recorded in circulation in May 2025, the latest figure represents an annual growth of N675.19 billion or 13.46 per cent.

The data also revealed that 91.27 per cent of total currency in circulation remained outside the banking system in May, up from 90.03 per cent in April. This means that more than nine out of every ten naira in circulation were held by individuals, traders, businesses and participants in the informal economy rather than deposited with financial institutions.

Although the ratio was slightly lower than the 92.40 per cent recorded in May 2025, it underscores the enduring dominance of cash transactions across the country.

Meanwhile, bank reserves declined from N34.60 trillion in April to N33.76 trillion in May, a drop of N840.77 billion or 2.43 per cent. The decrease points to reduced liquidity within the banking sector during the period, even as more cash circulated outside formal financial channels.

However, on an annual basis, bank reserves remained stronger, rising by N2.90 trillion from N30.87 trillion recorded in May 2025, representing a 9.39 per cent increase.

Commenting on the development, finance expert and Professor of Finance, Mufutau Ijaiya, attributed the rise in cash outside banks partly to political activities ahead of future elections.

According to him, politicians may be withdrawing and holding large amounts of cash in preparation for election-related spending.

Ijaiya also linked the trend to insecurity, noting that ransom payments and proceeds from criminal activities often remain outside the formal banking system.

“The money kidnappers collect from people is not usually returned to the banking system. This is another factor contributing to the high volume of cash circulating outside banks,” he said.