By Abiola Olawale
A recent report by the Central Bank of Nigeria (CBN) has revealed that majority of Nigerians are retaining their currency outside the formal banking system, with an astonishing 94% of cash being held outside the walls of the nation’s financial institutions.
The CBN made these revelations in its March 2024 Money and Statistics data. The figures paint a concerning picture of declining trust in the banking system and potential risks to the nation’s economic growth.
Based on the data retrieved from the Central Bank of Nigeria’s official website, it has been observed that the rate at which Nigerians are keeping cash is surpassing the efforts made by the CBN to boost circulation.
The data reveals that the amount of cash outside the banking system has surged to N3.87 trillion, representing a 150% increase in comparison to the previous year.
According to the CBN report, as of January 2024, the amount of N3.28 trillion was observed to be outside the banking system, marking a substantial increase from the previous year’s 2023.
The New Diplomat recalls that Nigerians were made to experience cash scarcity brought about by the naira redesign policy of the then Godwin Emefiele-led Central Bank of Nigeria. The cash crunch affected economic activities as several Nigerian traders reported losses due to failed transfers and the inability of customers to purchase products due to cash scarcity.
Fear surrounding the validity of old notes and difficulty accessing cash fueled a hoarding mentality that continues to this day.
The CBN has previously acknowledged the issue, citing “high volume withdrawals” from banks and “panic withdrawals” by customers.
It also warned banks and merchants against hoarding cash. However, despite these efforts and the suspension of fees on large cash deposits, Nigerians remain hesitant to return their money to the banking system.
