As of October 2024, Nigeria’s cash circulating outside the banking system reached a record N4.2 trillion, marking a significant increase in cash dependency despite efforts to control liquidity. This milestone underscores a shift away from digital payments, largely due to the reversal of strict cash policies implemented in early 2023.
Cash outside of banks has risen from a low of N792 billion in January 2023, when new naira notes were introduced, to the present record high, according to the Central Bank of Nigeria’s (CBN) most recent data. Additionally, the amount of currency in circulation has increased, rising from N4.3 trillion in September 2024 to N4.5 trillion in October 2024.
While overall money supply slightly declines to N107.6 trillion in October from N109.4 trillion in September, the significant rise in unbanked cash suggests continued reliance on physical currency in everyday transactions.
Despite the Central Bank’s tighter monetary controls, including raising the Cash Reserve Ratio (CRR) for banks in September 2024, these measures appear ineffective in curbing cash flow. The increase in legal tender availability indicates systemic challenges in implementing monetary policies to control liquidity effectively.
As ATMs across the country continue to struggle with money shortages, Nigerians increasingly depend on Point of Sale (POS) operators for withdrawals. These operators charge fees as high as 5% to 10%, placing a financial burden on consumers.
Frequent complaints suggest collusion between banks and POS operators, as many banks prioritize supplying bank notes to POS terminals over ATM machines. This practice has led to public frustration, with calls for regulators to address unfair practices and ensure equal access to bank notes services.
The growing money circulation outside banks signals a dependency on physical currency, which may counter efforts to modernize financial systems and digitize payments. Additionally, large volumes of unbanked cash circulating in the economy risk exacerbating inflationary pressures.
Experts stress that in order to allay public ire and support more general economic objectives, stronger laws, fair money distribution plans, and enhanced ATM services are required.
