Nigeria currency outside banks jumped to N4.646tn in October, signalling rising withdrawals and tighter liquidity as the CBN works to stabilise inflation.

Governor Olayemi Cardoso of the Central Bank of Nigeria, in Abuja on Monday, confirmed a worrying surge in Nigeria currency outside banks, which rose sharply to N4.646 trillion in October 2025 following new money and credit data released by the apex bank.

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The increase of N181.71 billion marks one of the strongest monthly jumps this year.

The sharp rise reversed a modest decline recorded in September, when cash outside banks slipped marginally from August levels.

The October rebound points to heightened withdrawal pressures driven by higher consumer spending and increased informal economic activity.

Total currency in circulation expanded to N5.058 trillion in October from N4.952 trillion the previous month with N4.646 trillion of that amount held outside banks, 91.9 per cent of Nigeria’s physical cash now sits beyond the formal sector, leaving only 8.1 per cent within the banking system.

This imbalance presents a major challenge for monetary policy transmission.

Bank reserves fell significantly from N34.67 trillion in September to N31.58 trillion in October, reflecting sustained cash outflows from commercial banks.

The shift underscores a growing liquidity tilt towards households and small businesses rather than the regulated financial system.

Data for 2025 shows that currency outside banks has remained persistently high despite periodic fluctuations.

The figure stood at N4.737 trillion in January, dipped in February, rose steadily into May, then fell again in June and August before its strong October resurgence. Total currency in circulation followed a similar path, nearing its yearly highs in October.

Economists warn that Nigeria’s heavy dependence on cash weakens deposit mobilisation, increases liquidity constraints, encourages unrecorded transactions and undermines the effectiveness of monetary control.

The power imbalance between formal and informal liquidity also complicates efforts to manage inflation, which is highly sensitive to cash-driven spending.

The October spike came shortly after the Monetary Policy Committee cut the Monetary Policy Rate by 50 basis points to 27 per cent in September, the first reduction since 2020.

At its November meeting, however, Governor Olayemi Cardoso and all twelve committee members voted to maintain the benchmark rate and adjust the policy corridor in an effort to prevent banks from warehousing excess liquidity at the apex bank.

Other policy levers were held steady, including the Cash Reserve Ratio for deposit money banks at 45 per cent and the liquidity ratio at 30 per cent.

The committee said these decisions were vital to safeguarding progress made in curbing inflation, describing its approach as strictly evidence-based.

Inflation has decelerated for seven consecutive months, falling to 16.05 per cent in October from 34 per cent a year earlier.

Food inflation dropped to 13.12 per cent, while core inflation eased to 18.69 per cent.

The Central Bank of Nigeria attributed these gains to tighter monetary conditions, improved exchange-rate stability and calmer fuel prices.

Governor Olayemi Cardoso insisted that the stability achieved so far is only the beginning, noting that macroeconomic resilience is a fundamental step on the path to sustainable growth.

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His remarks highlight the delicate balance the Central Bank of Nigeria now faces as cash circulates more freely outside the banking system even while inflation moderates.