Cash Demand Surges As Currency Outside Banks Hits N4.65trn

Nigeria’s appetite for cash intensified in October as Currency Outside Banks (COB) climbed for the second consecutive month to N4.65 trillion, signalling a renewed scramble for physical cash across households and businesses despite ongoing monetary tightening by the Central Bank of Nigeria (CBN).

According to the latest Money and Credit Statistics obtained from the apex bank, COB rose by 4.07 per cent in October, adding N181.71 billion to the N4.47 trillion recorded in September. The uptick follows a modest increase of N14.73 billion in September, after the indicator shed N43.44 billion between June and August.

The CBN data showed that cash outside banking vaults stood at N4.49 trillion in June, N4.63 trillion in May, N4.56 trillion in April, and N4.52 trillion in February. The figure had stood at N4.72 trillion in January, declining from N5.13 trillion in December 2024.

Similarly, Currency in Circulation (CIC) rose, hitting N5.06 trillion in October — a 2.12 per cent rise from N4.95 trillion in September. This represents a month-on-month increase of N107.95 billion. CIC had earlier grown by N29.57 billion in September after a cumulative decline of N78.16 billion between June and August.

The broader trend shows CIC hovering around the N5 trillion mark since the beginning of the year: N5.01 trillion in May and April, N5.00 trillion in March, and N5.04 trillion in February. It had opened the year at N5.23 trillion in January, sliding from N5.44 trillion in December 2024.

The CBN report also showed that credit to the private sector rose by 2.60 per cent to N74.41 trillion in October, up from N72.53 trillion in September, representing a monthly expansion of N1.88 trillion. However, year-on-year numbers paint a more subdued picture, with the figure posting a slight 0.46 per cent dip from N74.07 trillion in October 2024.

Government borrowing also rose within the month, as net credit to the government increased by 2.61 per cent to N24.79 trillion, compared with N24.16 trillion in September. Yet, despite the monthly uptick, year-on-year net government credit tumbled by 37.07 per cent from N39.39 trillion recorded in October 2024.

The growing preference for physical cash raises several macroeconomic concerns. High out-of-bank cash weakens monetary control, reduces deposit mobilisation, creates liquidity constraints for banks, and encourages informal transactions that escape regulatory visibility.

It also complicates inflation targeting, as large cash volumes outside the banking system blunt policy effectiveness.

The sharp rise in currency outside banks comes at a time when the CBN is focused on tightening liquidity to curb inflation, with the Monetary Policy Committee adjusting policy parameters in its September meetings.

The jump followed the Monetary Policy Committee’s decision in September to cut the Monetary Policy Rate by 50 basis points to 27 per cent, the first reduction since 2020. The easing came as inflation began to moderate and foreign exchange conditions improved.

However, at its November meeting, the MPC left the benchmark rate unchanged at 27 per cent and adjusted the policy corridor to prevent banks from warehousing liquidity at the apex bank, signalling a cautious approach to balancing easing with inflation control.