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Nigeria’s economy remains overwhelmingly cash-driven, with the Central Bank of Nigeria (CBN) reporting that 93.35% of physical currency circulates outside the formal banking system. By November 2025, N4.91 trillion of the N5.26 trillion in circulation was held informally, underscoring a persistent preference for liquidity outside banks. This trend reflects structural issues rather than temporary reactions to policy, highlighting limited public trust in financial institutions and the enduring dominance of the informal economy. Despite rising physical cash, bank reserves surged from N25.99 trillion in November 2024 to N30.94 trillion in 2025, signaling active liquidity management by the CBN. However, banks continue to capture only a small fraction of currency deposits, estimated at 6–10%, limiting credit deployment. Analysts suggest that ongoing liquidity sterilization and high reserve requirements contribute to this disconnect, leaving most newly issued cash circulating outside formal channels. The challenge is clear: Nigeria’s monetary system must bridge the gap between cash prevalence and financial inclusion to deepen banking participation and enhance the efficiency of the country’s economy.
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