Nigeria’s currency outside the banking system declined to N4.45 trillion in August 2025 from N4.49 trillion in July, according to the latest report by Financial Derivatives Company (FDC) Limited. The data, presented by FDC Managing Director, Mr. Bismarck Rewane, at the firm’s September breakfast meeting held at the Lagos Business School (LBS), indicates a modest but notable shift of cash holdings back into the formal financial system.
Rewane noted that while cash outside banks fell, quasi money – which includes savings and time deposits – rose to N80.21 trillion from N77.5 trillion within the same period. The development, he said, signals growing confidence in Nigeria’s financial institutions and the effectiveness of ongoing monetary tightening by the Central Bank of Nigeria (CBN).
Analysts interpret the decline as an encouraging sign of renewed trust in the banking sector. More Nigerians appear to be depositing their funds into banks, strengthening financial intermediation and making the money base accessible for productive use.
The implications of this trend are far-reaching. First, it supports financial inclusion by drawing more citizens into the formal banking system, allowing the CBN to better monitor and regulate money supply. Secondly, it boosts economic growth potential by increasing funds available for lending and investment.
Thirdly, with less cash circulating outside the system, inflationary pressures could ease, helping to stabilize consumer prices. Additionally, a higher proportion of money within the banking system enables the CBN to implement monetary policies more effectively.
However, challenges remain. Nigeria’s vast informal economy still relies heavily on cash transactions, limiting the full impact of this development. Experts also stress the need for continued efforts to strengthen public trust and improve access to banking services, especially in rural and underserved areas.
Meanwhile, broad money supply (M2) reversed its earlier decline, rising to N119.52 trillion in August from N117.4 trillion in June. Although money supply continues to grow in absolute terms, the rate of expansion has slowed – falling from 15.8% to 11.5% in August. FDC projects that growth could ease further to 10.4% in September as monetary policy restrictions tighten.
Overall, the decline in currency outside banks underscores a positive shift in public confidence and signals greater stability for Nigeria’s financial system.