Nigeria's currency in circulation has reached an unprecedented N5.24 trillion in January 2025, with an alarming 90.4% of this cash – N4.74 trillion – being held outside the banking system, according to latest Central Bank of Nigeria (CBN) data.

This represents a dramatic 43.5% surge from January 2024's N3.65 trillion, highlighting growing concerns about the effectiveness of Nigeria's cashless policy and financial inclusion efforts. The amount held outside banks has similarly jumped by 44.5% from N3.28 trillion in January 2024.

The year-long trend shows persistent growth in both metrics:

Q1 2024 saw steady increases, with circulation rising from N3.65 trillion in January to N3.87 trillion in March. The proportion of cash outside banks remained consistently above 89%.

Q2 maintained the upward trajectory, reaching N4.05 trillion by June, with over 93% of currency circulating outside the formal banking sector.

Q3 began with a brief dip in July, when cash outside banks temporarily decreased to N3.67 trillion. However, the trend quickly reversed, with circulation expanding to N4.31 trillion by September.

Q4 marked accelerated growth, as total currency in circulation surged from N4.55 trillion in October to N4.88 trillion in November, before hitting January 2025's record high.

The persistent high percentage of currency outside the banking system suggests significant challenges in Nigeria's push toward a more formalized financial system, despite various digital banking initiatives and financial inclusion programs.

This trend raises questions about the effectiveness of monetary policy transmission and the central bank's ability to monitor and control money supply effectively when such a large proportion of currency operates outside formal banking channels.

The continued preference for cash transactions also indicates potential challenges in tax collection and anti-money laundering efforts, as transactions outside the banking system are harder to track and regulate.​​​​​​​​​​​​​​​​