Cash Outside Banks Falls to Seven-Month Low as More Funds Return to Banking System

Cash held outside Nigeria’s banking system dropped to a seven-month low of N4.92 trillion in June 2026, reflecting a gradual return of physical currency to commercial banks as the Central Bank of Nigeria (CBN) intensifies efforts to promote digital payments and reduce the country’s dependence on cash transactions.

The latest Money and Credit Statistics released by the CBN showed that currency outside banks declined by N485.80 billion, or 8.98 per cent, from N5.41 trillion recorded in December 2025 to N4.92 trillion in June 2026.

The June figure represents the lowest level of cash held outside banks since November 2025, when it stood at N4.91 trillion, indicating a steady improvement in formal financial intermediation despite Nigeria’s continued reliance on cash for daily transactions.

Although total currency in circulation also declined during the period, the reduction was less pronounced. According to the CBN data, currency in circulation fell from N5.73 trillion at the end of December 2025 to N5.52 trillion in June 2026, representing a decrease of N209.56 billion, or 3.66 per cent.

The sharper decline in cash held outside banks compared to the overall reduction in currency in circulation suggests that a significant volume of physical cash was deposited back into the banking system rather than permanently withdrawn from circulation.

The movement of cash over the six-month period showed a largely downward trend. Currency outside banks fell from N5.41 trillion in December to N5.25 trillion in January and further declined to N5.19 trillion in February. Although the CBN did not publish data for March, the figure dropped to N5.08 trillion in April.

The trend was briefly interrupted in May, when cash outside banks increased to N5.19 trillion, representing a monthly rise of N109.34 billion, or 2.15 per cent, compared with April. However, the increase proved temporary as the figure dropped sharply by N270.97 billion, or 5.22 per cent, in June—the largest monthly decline recorded within the available dataset.

Further analysis of the CBN data shows that 89.11 per cent of all currency in circulation remained outside banks in June 2026, compared with 91.27 per cent in May and 89.74 per cent in June 2025.

The figures indicate that for every N100 in circulation during June, approximately N89.11 remained outside the banking system, compared with N91.27 a month earlier. The month-on-month decline of 2.16 percentage points suggests that more cash returned to banks during the period.

Compared with the same period last year, the ratio also eased by 0.63 percentage points, reflecting gradual improvements in formal cash management despite the growing volume of money circulating within the economy.

The improvement becomes more evident when compared with the end of 2025. In December, about 94.33 per cent of all currency in circulation was held outside banks, leaving only 5.67 per cent within the banking system. By June 2026, the proportion of cash outside banks had declined to 89.11 per cent, while the share retained within banks almost doubled to 10.89 per cent.

Despite the improvement, the data underscores Nigeria’s continued dependence on physical cash, particularly within the informal sector, where cash remains the preferred medium for retail trade, transportation, small businesses and rural economic activities.

The latest figures come as the CBN continues to implement reforms aimed at accelerating financial inclusion and expanding digital payment adoption across the country.

Speaking at the launch of the Nigeria Payment System Vision (PSV) 2028 in Abuja, CBN Governor Olayemi Cardoso said the initiative seeks to build on Nigeria’s progress in digital payments while creating a more inclusive, technology-driven financial ecosystem.

Under the roadmap, the apex bank aims to reduce the proportion of cash held outside the banking system to below 40 per cent of total currency in circulation. To support the objective, more than 10 million QR-code and tap-to-pay acceptance points are expected to be deployed across markets, transport hubs, commercial centres and rural communities nationwide.

Financial analysts say the declining volume of cash outside banks could strengthen liquidity within the banking sector, enhance monetary policy effectiveness and improve transparency in financial transactions if the trend is sustained.