By Damilola Benjamin
Cash held outside Nigeria’s banking system declined to ₦5.20 trillion in February, signalling a modest easing of liquidity pressures in the economy amid efforts to strengthen monetary control and deepen financial intermediation.
Latest data from the Central Bank of Nigeria (CBN) showed a slight moderation from previous levels, reflecting improved cash circulation within the formal banking system and gradual return of funds by households and businesses.
Analysts say the development points to a combination of tighter monetary conditions, rising interest rates and increased adoption of digital payment channels, which have collectively reduced the volume of idle cash held outside the banking sector.
The decline comes against the backdrop of sustained liquidity management measures by the apex bank aimed at curbing inflationary pressures and stabilising the financial system.
Economists note that high volumes of cash outside banks typically weaken the effectiveness of monetary policy, as they limit the ability of the CBN to control money supply and influence lending conditions.
A financial analyst, Bismarck Rewane, said the marginal decline suggests a gradual normalisation of liquidity conditions, although significant volumes of cash still remain outside the system.
“While the moderation is a positive signal, ₦5.20 trillion is still relatively high. The key is to sustain policies that incentivise financial inclusion and discourage cash hoarding,” he said.
The trend also reflects growing confidence in the banking system, supported by improvements in payment infrastructure and regulatory measures encouraging electronic transactions.
However, stakeholders caution that structural challenges—such as limited access to banking services in rural areas, weak financial literacy and trust deficits—continue to drive cash-based transactions in parts of the country.
Industry players argue that sustained investment in digital banking, agency networks and payment systems will be critical to further reducing cash outside the formal system.
They also stress the need for policies that promote transparency, reduce transaction costs and encourage individuals and small businesses to channel funds through regulated financial institutions.
Despite the recent moderation, analysts maintain that reducing cash outside banks remains a key priority for monetary authorities, given its implications for inflation control, financial stability and economic growth.
