The Central Bank of Nigeria (CBN) has raised concerns over the alarming volume of cash circulating outside the banking system, which has reached N4.3 trillion as of October 2024. This figure accounts for a staggering 94.3% of the total currency in circulation, signaling a troubling trend in the nation’s monetary system. Comparatively, this is a 59% jump from the N2.7 trillion recorded in October 2023.
Despite numerous efforts to transition Nigeria towards a cashless economy, the reliance on physical cash remains high. Experts point out that this trend undermines the modernization of the country’s financial system. According to Olusoji Oluwole, President of the Association of Senior Staff of Banks, Insurance, and Financial Institutions, the persistent cash shortages can be linked to the CBN’s failure to adequately supply cash to commercial banks.
To tackle the issue, the CBN has announced tough measures, including a fine of N150 million for any commercial bank branch found to be diverting mint naira notes to illegal currency hawkers or middlemen. This crackdown is aimed at addressing the widespread hoarding and illegal trade of the naira, ensuring that cash reaches the public more efficiently.
The situation poses significant risks to Nigeria’s financial stability. The high volume of money outside banks weakens the effectiveness of the CBN’s monetary policies and creates challenges for economic growth. The apex bank has emphasized the need for strict enforcement of cash management rules to curb illegal practices and improve the distribution of money within the economy.
As cash shortages and illegal trading of naira notes persist, the CBN’s actions underscore the urgency of restoring confidence in the banking system and pushing forward with the cashless policy goals.
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