Despite the government’s push for a cashless society, Nigerians continue to favour physical cash, with the value of currency held outside the banking system rising to N4.6 trillion in March 2025—accounting for an overwhelming 91.9% of the total currency in circulation.
This surge marks a 26.7% increase from the previous year and underscores the deep-rooted reliance on cash in an economy where electronic payment alternatives have yet to fully capture trust and usage.
The latest figures from the Central Bank of Nigeria (CBN) highlight a stark contrast to the nation’s push for a more digital economy.
While the total currency in circulation grew to N5.00 trillion, the bulk of it remains outside formal banking channels, further complicating the government’s cashless policy ambitions.
This persistence of cash dominance is most pronounced in the informal economy, which constitutes over 50% of Nigeria’s GDP.
In rural and peri-urban areas, where access to banking infrastructure is often limited and digital literacy is still evolving, the preference for physical cash persists.
Traders, small businesses, and low-income households, who operate largely in cash, face additional challenges such as inflation, network failures, and unreliable banking systems.
In March 2025, Nigeria’s inflation rate surged to 24.23%, exacerbating the demand for immediate liquidity.
As consumer prices continue to rise, Nigerians are increasingly withdrawing cash to meet daily needs in an environment marked by price volatility and rising uncertainty.
In fact, many consumers continue to view banking platforms as unreliable, citing frequent issues with bank transfers, ATM downtimes, and delayed reversals.
Despite the growth of fintech and government support for electronic payments, physical currency remains deeply embedded in Nigerian society’s economic and cultural fabric.
For a cashless transition to succeed, there must be significant progress in building trust in digital systems, expanding infrastructure, and enhancing financial education.
This ongoing reliance on physical cash poses significant challenges for Nigeria’s monetary policy.
The Central Bank’s traditional liquidity management tools—such as interest rate adjustments and open market operations—are rendered less effective when the bulk of the currency remains unbanked.
Analysts are concerned that unless decisive steps are taken to bring more currency into the banking system, the nation’s monetary policy may face continued strain, especially as inflation accelerates.
As the Central Bank’s Monetary Policy Committee prepares to meet in May 2025, experts expect a more hawkish stance to address the growing liquidity challenges.
The need to mop up excess liquidity or reintroduce more stringent controls may become inevitable, further complicating the country’s journey toward a truly cashless economy.
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