Nigeria's cash economy dominates with 93% of money outside banks

Nigeria's cash economy remained dominant in 2025, with 93.35% of all physical cash sitting outside the formal banking system. Central Bank data shows currency outside banks stood at ₦4.91 trillion in November 2025, compared to total currency in circulation of ₦5.26 trillion. This means for every ten naira bills circulating, nine are held entirely outside banks.

The trend has been consistent throughout the year. In January 2025, the ratio was 90.49%, rising to 92.39% in May and peaking at 93.35% in November. This marks nearly two straight years where more than nine out of every ten naira bills remain in the informal economy—moving through retail trade, transport, household spending, and small-scale enterprises with minimal recycling back into formal banks.

Total currency in circulation hit its 2025 peak in November at ₦5.26 trillion, up from ₦5.01 trillion in May and ₦4.92 trillion in August. Year-on-year, cash supply increased by ₦383.7 billion. Yet despite this rising supply, currency held inside banks stayed stuck at just 6-10% of total circulation—meaning new cash issuance largely leaked into the informal sector rather than boosting deposits.

Bank reserves told a different story. They jumped from ₦27.43 trillion in January to ₦30.94 trillion in November 2025—a ₦3.5 trillion increase. Year-on-year, reserves grew by nearly ₦5 trillion (from ₦25.99 trillion in November 2024). This indicates central bank tightening: higher cash reserve requirements and liquidity management actions mopped up bank funds, forcing financial institutions to lock more money with the CBN rather than deploy it into credit.

The divergence is stark: bank reserves grew by nearly ₦5 trillion while currency in circulation grew by less than ₦400 billion. This tightening restricts lending capacity and raises the cost of credit, affecting businesses already facing steep borrowing costs. Meanwhile, the informal economy absorbs most new cash, suggesting persistent distrust or reluctance to keep money in banks.

For Nigerian businesses and workers, this means cash remains king for daily transactions. But the credit squeeze from rising bank reserves could make business loans harder to get and more expensive. Will you adjust your operations to work within this cash-heavy reality, or are you seeing opportunities to bridge the gap between formal banking and informal cash flows?

SOURCE: https://nairametrics.com/2026/01/06/over-93-of-nigerias-cash-stayed-outside-banks-in-november/