According to the latest data from the Money and Credit statistics of the Central Bank of Nigeria (CBN), currency outside banks soared year on year by 44.46%, to ₦4.7 trillion by January 2025 up from ₦3.3 trillion in January 2024. Currency outside the bank represents 12.8% of narrow money in January 2025, an increase from 10.4% in January 2024. Also, currency outside banks as a percentage of total money supply (M3) increased in January 2025 to 4.3% from 3.5% last year. The statistics suggest a growing preference for cash based payments and an expansion of the informal economy.
Moreover, an increase in the proportion of currency circulating outside banks impedes the transmission of monetary policy signals through interest rate adjustments, which is critical for the effectiveness of monetary policies. To address this pressing issue, urgent corrective measures need to be implemented. These measures could include reducing bank charges to incentivize greater participation in the formal banking system, expanding banking infrastructure, especially in underserved areas, and strengthening mechanisms for addressing payment failures associated with interruptions in internet service

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