The amount of cash held outside Nigeria’s banking system increased to N5.19 trillion in May 2026, highlighting the continued reliance on physical cash despite ongoing efforts to promote digital transactions and financial inclusion.
Recent financial data revealed that cash kept outside banks rose by N109.34 billion during the month, moving from N5.08 trillion in April to N5.19 trillion in May. Compared with the same period last year, the figure increased by N559.16 billion, reflecting a steady preference among many Nigerians to hold cash rather than keep funds within the formal banking sector.
Total currency circulating within the economy also recorded growth, rising from N5.65 trillion in April to N5.69 trillion in May. This represented a monthly increase of N43.59 billion and a year-on-year growth of more than N675 billion.
The latest figures indicate that over 91 percent of all cash in circulation remained outside banking institutions during May 2026. Although this level was slightly lower than the corresponding period in 2025, it was higher than the figure recorded in April, suggesting that cash usage remains deeply rooted in the economy.
The trend persists despite significant growth in electronic payment solutions, mobile banking services, fintech innovations, agency banking networks, and broader efforts to encourage cashless transactions across the country.
Meanwhile, banking sector reserves experienced a decline during the month, falling by more than N840 billion from April levels. However, reserves remained substantially higher than they were a year earlier, indicating stronger liquidity within the banking system over the longer term.
Historical data show that cash held outside banks has remained consistently elevated throughout recent months. Although there have been occasional declines, overall levels continue to point to a strong dependence on physical currency.
Financial experts note that large volumes of cash remaining outside the banking system can weaken the effectiveness of monetary policy. When funds are not deposited in banks, financial institutions have fewer resources available for lending and credit creation, limiting their ability to support economic growth.
To address this challenge, the Central Bank has outlined plans to significantly reduce cash dependence and bring more Nigerians into the formal financial system. As part of its long-term payments strategy, the regulator aims to expand financial inclusion by onboarding millions of additional users into the banking ecosystem over the coming years.
The initiative also seeks to strengthen digital payment adoption, improve public confidence in financial services, and position Nigeria as one of Africa’s leading payments markets.
A key objective of the strategy is to reduce the proportion of cash held outside banks to below 40 percent of total currency in circulation by 2028. Policymakers believe achieving this target would improve liquidity within the banking sector, enhance financial intermediation, and strengthen the overall effectiveness of monetary policy.
As Nigeria continues its transition toward a more digital financial system, the latest figures underscore the scale of the challenge facing authorities in reducing the country’s longstanding dependence on cash transactions.
