The full worth of forex outdoors Nigeria’s banking system rose to N4.6 trillion in March 2025, accounting for 91.9% of the N5.00 trillion in whole forex in circulation in the course of the interval.
That is in line with the newest cash and credit score statistics launched by the Central Bank of Nigeria (CBN), highlighting the nation’s sustained dependence on bodily money regardless of the federal government’s cashless coverage push.
This marks a big improve in comparison with the identical interval in 2024, when N3.63 trillion was held outdoors banks out of N3.87 trillion in circulation.
The brand new figures signify a 26.7% year-on-year improve in forex held outdoors banks and a 29.3% rise in whole forex in circulation.
Money dominance persists regardless of financial tightening
- The March knowledge highlights a persistent pattern: Nigerians proceed to favour bodily money over banking channels. Between February and March 2025, forex outdoors banks rose barely from N4.52 trillion to N4.60 trillion, whilst whole forex in circulation dipped marginally from N5.04 trillion to N5.00 trillion. The proportion of forex outdoors the banking system consequently climbed to 91.9%, the best stage in 5 months.
- This pattern has remained comparatively constant all through the primary quarter of the 12 months: In January 2025, the determine stood at N4.74 trillion, which made up 90.5% of the N5.24 trillion in circulation. February noticed a short dip within the proportion to 89.6%, earlier than rising once more in March. The continued dominance of money suggests deep-rooted behavioural and structural reliance on forex for transactions, significantly inside the casual financial system.
Inflation possible driving liquidity preferences
The elevated circulation of bodily money coincides with rising inflationary strain. In accordance with the Nationwide Bureau of Statistics (NBS), headline inflation rose to 24.23% in March, up from 23.18% in February 2025. On a month-on-month foundation, inflation surged by 3.90%—practically double February’s fee of two.04%—signalling an accelerated rise in shopper costs.
In an inflationary surroundings, extra Nigerians are inclined to hold money in hand to fulfill speedy wants, particularly the place value volatility is excessive and entry to banking infrastructure is unreliable. That is significantly evident in rural and peri-urban areas, in addition to amongst casual companies, merchants, and low-income households that transact largely in money.
Nigeria’s casual financial system—estimated to contribute over 50% of GDP—depends closely on bodily money. Restricted digital literacy, poor community infrastructure, and lack of belief in banking platforms contribute to the continued choice for money. Many shoppers nonetheless understand bank transfers as unreliable, citing delays, failed reversals, and ATM downtimes as every day frustrations.
Regardless of fintech development and coverage help for digital funds, bodily forex stays deeply embedded within the financial and cultural cloth of Nigerian society. With out important progress in constructing belief, increasing infrastructure, and monetary schooling, the push towards a cashless financial system might stay elusive.
CBN faces liquidity administration hurdles forward of Could MPC assembly
The excessive quantity of unbanked forex presents a rising problem for financial coverage implementation.
- When many of the nation’s bodily money stays outdoors formal banking channels, the effectiveness of conventional liquidity administration instruments, reminiscent of rate of interest changes and open market operations, is considerably weakened.
- The Central Bank’s Financial Coverage Committee (MPC), which is scheduled to fulfill on Could 19 and 20, 2025, should grapple with this challenge.
- The committee had opted to carry charges at its final assembly in February, however with inflation accelerating and forex outdoors banks at document ranges, analysts anticipate a extra hawkish stance in Could.
Sterilising extra liquidity by way of standard means might not be enough if the majority of forex stays outdoors the monetary system. This might drive the apex bank to think about extra aggressive measures to mop up liquidity or reintroduce controls to push extra cash into the banking sector.
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