Nigeria's decision to tighten cash withdrawal limits has sparked new debate in markets, boardrooms and the informal economy. Under the new CBN rules taking effect in January 2026, individuals can withdraw up to ₦500,000 weekly and corporates can withdraw up to ₦5 million across all channels, with higher withdrawals subject to regulated fees. For some, it is a necessary step towards financial transparency, anti-money laundering compliance and digital transformation. For others, it threatens to destabilize the informal sector that remains the backbone of Nigeria's commerce. Both views reflect parts of the truth, but the deeper story is that Nigeria is entering a quiet monetary revolution – a revolution that could reshape the transactions, savings and creation of businesses for millions of people.
“Fintechs, supermarkets, organized retail, platform-based transport operators and SMEs with digital records will benefit most from improved traceability and reduced cash-handling risks.”
The cultural and economic weight of cash
Cash is not just a payment instrument in Nigeria; It has a cultural, psychological and economic basis. It works when networks fail, when power goes off, and when digital literacy is limited. This matters in a country where the informal economy accounts for about 65 percent of GDP and more than 90 percent of employment, according to ILO data. From Balogun to Onitsha and Kano to Uyo, cash is the operating system of everyday life. Against this backdrop, tight cash limits are more than regulatory adjustments – they disrupt habits that have shaped economic behavior for decades.
Also read: Nigeria's monetary reforms: What the CBN has done—and what's next in 2026
Pressure to formalize in cash-heavy economy
While cash transactions dominate in Nigeria, there has been significant improvement in financial inclusion. World Bank data shows that about 63 percent of adults now have an account, and more than half have made digital transactions. This shift has been accelerated with the removal of Nigeria from the FATF gray list in October 2025 – a corrective step after Nigeria was placed in the high-risk category in 2023 following deficiencies in AML/CFT surveillance, with studies showing that capital inflows could reduce by up to 7.6 percent of GDP. Tightening the cash-withdrawal limit is part of the post-grey list reform architecture. It strengthens traceability, reduces the movement of illicit cash and signals commitment to financial discipline and transparency.
The promise of digitalization and visibility
For businesses, especially SMEs, reduced reliance on cash can have tangible benefits. Digital transactions make it easier to record, enable access to credit scoring and increase participation in formal value chains. Nigeria’s fintech ecosystem is already demonstrating what is possible. For example, PalmPay reports 35 million registered users and over a million business customers supported by an extensive agent network that connects cash-heavy communities to digital platforms. With 84 percent of adults owning a mobile phone, the infrastructure for a more cash-rich economy is strengthening. But digitalization also requires credibility, trust and affordability – areas where Nigeria still faces shortcomings.
nonspecific spinal weakness
The informal economy is vast, fragile and highly vulnerable to liquidity constraints. Micro-entrepreneurs again depend on daily cash turnover for storage, transportation, salary payments and household needs. A sudden or poorly ordered reduction in cash availability could bring business to a halt in many communities. Rural areas face even greater risks. Sparse banking infrastructure, weak network coverage and irregular power supply mean that digital adoption cannot be easily mandated. In such an environment a liquidity shock can rapidly translate into reduced food availability, slowed trade and increased vulnerability. Digital transactions also involve fees which can greatly reduce the margins of small merchants. And trust remains a major hurdle: memories of bank failures, sudden policy changes and sanctions still shape attitudes towards formal finance.
A young, connected nation at a turning point
Despite these risks, Nigeria stands at a defining moment. Its young population, rapidly growing fintech sector and expanding agent network form the foundation for long-term digital transformation. Cash-withdrawal limits, when appropriately indexed, can accelerate this shift towards a more transparent, connected and efficient economy. However, sequencing will be decisive. The policy should be in line with expanded agent networks, reliable digital platforms, lower micro transaction fees and targeted relaxations for vulnerable groups such as rural farmers or micro retailers. Poor sequencing risks increasing inequality and triggering backlash.
Winners, Losers and Tomorrow's Market Size
Fintechs, supermarkets, organized retail, platform-based transport operators and SMEs with digital records will benefit most from improved traceability and reduced cash-handling risks. Micro-enterprises with limited digital readiness and rural traders and workers without social protection face high short-term adjustment costs. If reforms deepen inequality or disrupt livelihoods, resistance will increase – formalization will slow and trust in institutions will weaken.
Also read: Does the CBN's decision to keep the monetary policy rate unchanged support price stability?
a quiet revolution in motion
Nigeria now stands where Kenya stood before the rise of M-PESA and where India stood before its gradual formalization drive. Success in both countries required patience, recalibration and inclusive governance. Cash will remain important in Nigeria culturally, economically and practically. But as digital rail expands and policy constraints increase, its dominance will diminish. If executed well, this change could open up new access to credit, strengthen tax collections, support business growth and enhance economic resilience. It will also strengthen Nigeria's credibility globally after coming out of the FATF gray list. If mishandled, it can put pressure on livelihoods, slow down business and deepen distrust of financial institutions. Nigeria has chosen the path of reform. The real test now is whether it can bring about a change that is disciplined, inclusive and in line with the realities of those who rely most on cash.
Dr. Oluyemi Adeosun, Chief Economist, BusinessDay
