Despite years of implementing cashless policy with the promotion of electronic payments, Nigerians continue to hold a significant amount of money outside the banking system.
Latest figures from the Central Bank of Nigeria (CBN) showed that currency outside banks rose to N5.19 trillion in May 2026, underscoring the persistent dominance of cash transactions across the country, reports Daily Trust.
The development highlights the challenges confronting Nigeria’s cashless policy, which was introduced to encourage digital payments, improve financial inclusion, reduce the cost of cash management, and strengthen transparency within the financial system.
While digital payment channels have expanded rapidly in recent years, cash remains the preferred medium of exchange for millions of Nigerians, particularly those operating within the informal sector.
This is coming amidst a reported move by the federal government to tighten the cashless policy in order to curb widespread insecurity.
According to the CBN’s Money and Credit Statistics, currency held outside the banking system increased from N5.08 trillion in April 2026 to N5.19 trillion in May 2026. This represents a month-on-month increase of N109.34 billion or 2.15 percent.
On a yearly basis, the amount of cash held outside banks rose by N559.16 billion from N4.63 trillion recorded in May 2025, translating to an annual increase of 12.07 percent. The figures suggest that a growing volume of cash released into the economy is not finding its way back into the formal banking system.
The trend persists despite sustained efforts by regulators, commercial banks, mobile money operators, and fintech firms to promote electronic payment alternatives such as bank transfers, mobile wallets, point-of-sale transactions, and agent banking services.
Data from the apex bank further revealed that total currency in circulation increased to N5.69 trillion in May 2026 from N5.65 trillion recorded in April. The N43.59 billion increase represents a monthly growth rate of 0.77 percent.
Compared with the N5.02 trillion in circulation recorded in May 2025, the latest figure reflects an annual increase of N675.19 billion or 13.46 percent.
A closer analysis of the data indicates that an overwhelming proportion of the cash circulating within the economy remains outside formal banking channels.
Currency outside banks accounted for 91.27 percent of total currency in circulation in May 2026, compared with 90.03 percent in April.
This means that more than nine out of every ten naira in circulation were held by households, businesses, traders, transporters and other participants in the informal economy rather than being deposited in financial institutions.
Although the ratio remains slightly lower than the 92.40 percent recorded in May 2025, it nevertheless points to the enduring reliance on cash across large segments of the economy.
Bank reserves fell from N34.603 trillion in April to N33.763 trillion in May, representing a decrease of N840.77 billion or 2.43 percent.
The decline suggests lower liquidity buffers within the banking system during the period, even as more currency circulated outside formal financial channels. However, the reserves position remained considerably stronger than a year earlier.
Compared with May 2025, bank reserves increased by N2.90 trillion from N30.865 trillion, representing annual growth of 9.39 percent.
…Expert links excess cash to election spending
Speaking with our correspondent, a Professor of Finance, Mufutau Ijaiya said political factors could account for it, noting that many politicians might be taking money from the banks to spend on the forthcoming electioneering.
“They are taking money from the banks and they keep the money in preparation for the election. That is one of the major factors that could have caused that,” he said.
Ijaiya noted that the excess cash could also be linked to insecurity, saying, “The money kidnappers collect from people, they don’t take it to the bank. This is another reason why we have a lot of money outside the banking system.”
The Central Bank of Nigeria has released a strong affirmation of the security of cash within Nigerian banks, highlighting the country’s banking sector’s soundness.
Amid widespread unconfirmed rumours, not originating with the CBN, raising concerns about the health of Nigerian banks, the central bank of Nigeria asked the people not to panic and to continue with their usual banking activity.
To ease people’s anxieties and comfort them, the CBN emphasized its readiness and capability to carry out its stated role of maintaining a stable financial system in Nigeria.
This statement by the CBN responds to the concern caused by unverified information and seeks to reassure the public about the safety and stability of the country’s banking industry.
“The Central Bank of Nigeria has noticed reports, in certain media outlets, about a recommendation for the Federal Government to take over some CBN-supervised financial institutions,” said the apex bank’s acting Director, Corporate Communications, Hakama Sidi-Ali, in a statement issued today.
“To avoid any doubt, Nigerian banks are still safe and sound. The CBN advises the public to go about their daily lives without getting disturbed by reports regarding the health of Nigerian banks that have not come from the CBN.
“The CBN is fully equipped to carry out its statutory duty of ensuring the stability of Nigeria’s financial system. “We assure the general public and depositors that their funds are safe in Nigerian financial institutions.
“Bank customers are therefore advised to proceed with their banking transactions as usual, as there is no cause for concern.”
This statement follows a report by the CBN’s special investigator, Jim Obazee, alleging that Godwin Emefiele, the former governor of the federal bank, used proxies to establish two financial institutions.
According to the report, Emefiele utilised proxies to acquire Union Bank of Nigeria for Titan Trust Bank Limited and Keystone Bank without providing any proof of payment. As a result, it recommended that the federal government reverse the sale and take over the banks.
