Cash Returns to Banks as Currency Outside Financial System Drops to N4.92 Trillion

The volume of cash circulating outside Nigeria’s banking system declined significantly in the first half of 2026, suggesting that more physical currency is finding its way back into commercial banks as the Central Bank of Nigeria (CBN) advances policies designed to deepen electronic payments and strengthen formal financial intermediation.

According to the latest Money and Credit Statistics released by the apex bank, currency held outside banks stood at N4.92 trillion in June 2026, down from N5.41 trillion at the close of December 2025.

The N485.80 billion decline represents an 8.98 percent reduction over the six-month period and marks the lowest level recorded since November 2025.

The movement comes at a time when the CBN continues to encourage digital payment adoption, financial inclusion and reduced reliance on cash across households and businesses.

Data from the central bank also showed that total currency in circulation eased during the review period, although at a slower pace.

Currency in circulation fell from N5.73 trillion in December 2025 to N5.52 trillion in June 2026, a decline of N209.56 billion, or 3.66 percent.

The difference between the reduction in overall currency and the sharper drop in cash outside banks indicates that a considerable amount of physical cash was redeposited into the banking sector instead of disappearing from circulation.

Monthly figures reveal a generally downward trajectory. Currency outside banks declined in January and February before easing further in April after data for March was unavailable.

Although there was a temporary increase in May, the trend reversed strongly in June, when the banking system recorded the largest monthly inflow of physical cash within the available data set.

The statistics further showed that 89.11 percent of all currency in circulation remained outside banks in June, compared with 91.27 percent in May. On an annual basis, the ratio also improved from 89.74 percent recorded in June 2025.

The figures imply that for every N100 in circulation during June, approximately N89 remained outside the banking system, while nearly N11 was retained within banks. This reflects a gradual improvement in cash mobilisation by financial institutions.

A comparison with the end of last year presents a clearer picture of the shift. In December 2025, more than 94 percent of all currency in circulation was outside the banking system.

By June 2026, that proportion had fallen to just over 89 percent, while the share of currency held within banks almost doubled over the same period.

Despite the progress, cash continues to dominate transactions across large segments of the Nigerian economy, particularly within the informal sector where retail commerce, transportation services, small enterprises and many rural communities still rely heavily on physical money.

The latest data aligns with the CBN’s broader objective of transforming Nigeria into a more digitally driven payments economy.

At the unveiling of the Nigeria Payment System Vision (PSV) 2028 in Abuja, CBN Governor Olayemi Cardoso said the roadmap seeks to accelerate digital payment adoption, expand financial inclusion and improve the efficiency of the country’s payment infrastructure.

Among its key targets, the central bank plans to reduce the share of currency held outside banks to below 40 percent of total currency in circulation.

The strategy also includes deploying more than 10 million QR-code and tap-to-pay acceptance points across markets, transportation corridors, commercial centres and underserved communities nationwide.

Analysts believe that sustained growth in bank deposits could improve liquidity across the financial system, strengthen the effectiveness of monetary policy and increase transparency in economic transactions as more payments migrate into formal channels.