In a striking reveal from the Central Bank of Nigeria (CBN)’s latest money and credit statistics, Nigerians held ₦4.47 trillion in currency outside the banking system in September 2025. At the same time, the broad money supply (M3) contracted to ₦117.78 trillion, down from ₦119.69 trillion in August a reduction of ₦1.91 trillion or 1.6 % month-on-month
Key Figures
- Cash held outside banks: ₦4.47 trillion, representing roughly 90.2% of total currency in circulation of ₦4.95 trillion for September.
- M3: ₦117.78 trillion in September, down from ₦119.69 trillion in August.
- On a year-on-year basis, M3 rose by 7.6% (from around ₦109.41 trillion in September 2024) while cash outside banks rose by 11.2% (from ₦4.02 trillion).
What’s Driving the Shift?
Several factors are contributing to this dynamic:
- A large share of currency is held outside banks, indicating many individuals and businesses prefer physical cash to bank deposits.
- The contraction in M3 is driven by a drop in net domestic assets (−2.5%) and tighter banking-sector liquidity measures, despite a rate cut by the CBN.
- Structural issues such as high transaction costs, informal-sector dominance, limited banking penetration and trust issues continue to encourage cash hoarding.
Implications for Policy & the Economy
- For the CBN and regulators: The high volume of cash outside banks weakens the transmission of monetary policy (rate changes, reserve requirements) because a large share of money sits outside formal channels.
- For the economy: Large cash holdings outside the banking system may limit financial intermediation, hamper tax collection, and increase the size of informal economic activity.
- For individuals & businesses: Those not depositing into banks may forego interest, access to banking services, and may bear higher risk (loss, theft, lack of formal credit access).
What to Watch
- Whether deposit mobilization initiatives or digital-finance incentives reduce the volume of cash outside banks.
- Whether subsequent CBN policy meetings will ease reserve requirements or adjust liquidity tools to restore money-supply growth.
- The impact of this trend on inflation, credit growth and informal sector size in the near term.
Conclusion
The figures for September 2025 underscore a paradox: while broad money supply shrank, physical cash held outside the banking system rose — meaning Nigerians are increasingly opting for cash over formal deposit-based holdings. The estimated ₦4.47 trillion stashed outside banks is not just a statistic but a reflection of structural behavioural and institutional factors in Nigeria’s financial system. For policymakers, the challenge is clear: how to convert these idle cash holdings into actionable financial-system resources that can fuel formal lending, savings and broader economic growth.
