Cash Outside Banks surges as CBN data shows a sharp rise in October withdrawals, deepening liquidity strain and challenging monetary control

The Central Bank of Nigeria, Cash Outside Banks surges once again in October 2025, reversing earlier declines and raising serious concerns for monetary policy transmission across the economy.

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The apex bank’s latest money and credit statistics show that cash held outside the banking system leapt to N4.646tn in October, up from N4.465tn in September.

The rise of N181.71bn marks one of the strongest monthly increases recorded this year and signals a renewed rush towards physical currency, even as monetary tightening remains in place.

Currency in circulation also rose from N4.952tn in September to N5.058tn in October. With 91.9 per cent of this cash now outside the formal banking system, the trend underscores a deepening preference for informal financial transactions.

Only 8.1 per cent remained within banks, a pattern that weakens policy effectiveness and complicates inflation targeting.

Bank reserves fell sharply from N34.67tn in September to N31.58tn in October, reflecting tighter liquidity as withdrawals intensified.

Analysts note that the shift suggests liquidity is increasingly concentrated among households and informal businesses rather than within the formal banking structure.

Throughout 2025, out-of-bank cash has oscillated but stayed structurally high. It reached N4.737tn in January before sliding in February and June, only to climb again from March through May and now significantly in October.

Currency in circulation has mirrored this path, reaching its second-highest level this year.

Economists warn that the trend poses a powerful challenge to the CBN’s tightening strategy. High volumes of physical cash support a thriving informal sector, reduce deposit mobilisation, limit banks’ lending capacity and undermine regulatory visibility.

These dynamics weaken the transmission of monetary policy at a time when inflation management remains critical.

The October 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 easing since 2020.

But faced with persistent liquidity distortions, the MPC held the rate steady at its November meeting.

Announcing the decision, CBN Governor Olayemi Cardoso said all twelve committee members voted to maintain the monetary stance, adjusting the corridor to discourage banks from parking excess liquidity at the apex bank.

The Cash Reserve Ratio and liquidity ratio were left unchanged.

Cardoso emphasised that inflation had slowed for seven consecutive months, falling to 16.05 per cent in October. Food inflation moderated to 13.12 per cent, while core inflation eased to 18.69 per cent.

He attributed the moderation to sustained policy tightening, improved foreign-exchange stability and firmer capital inflows.

He described macroeconomic stability as a vital foundation. In his words, establishing stability is a crucial step on the path to long-term economic growth, and the bank would continue to rely on data-driven decisions as it navigates the evolving liquidity landscape.

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Despite this progress, the fact that Cash Outside Banks Surges to alarming levels suggests that restoring confidence in the formal financial system remains one of the central challenges confronting the monetary authorities.