The Central Bank of Nigeria (CBN) has revealed that currency in circulation has reached a historic N4.1 trillion as of August 2024.
A staggering 93.34% of this amount, or N3.86 trillion, is outside the banking sector.
This means that only 6.66% of the country’s currency is held within the formal banking system.
This revelation has caused concern among financial experts and analysts, as it highlights a persistent issue with Nigeria’s cash-heavy economy.
Despite efforts by the CBN to promote financial inclusion and cashless transactions, most of Nigeria’s currency is still in the hands of individuals and businesses.
The CBN’s report showed that there has been a steady increase in the amount of currency in circulation throughout 2024.
In July 2024, the currency in circulation was N4.05 trillion, but by August, it had grown to N4.1 trillion.
This marks an 11.05% increase since the beginning of the year, and a significant 56.17% rise when compared to the same period in 2023.
The numbers show that Nigeria’s economy remains heavily reliant on cash, even though the CBN has introduced several initiatives to encourage cashless payments and digital banking.
Financial analysts have expressed concern over this trend, noting that the large amount of money outside the banking system poses risks to the economy.
He also noted that it could lead to increased corruption and encourage the informal economy, where transactions are difficult to monitor.
The CBN’s data shows that the currency in circulation has been increasing steadily throughout the year.
At the start of 2024, the currency in circulation was N3.65 trillion.
In February, it rose to N3.69 trillion, marking a modest 1.18% increase from January.
By March, it had jumped to N3.87 trillion, recording a 4.76% month-on-month increase.
The upward trend continued in April, with currency circulation reaching N3.92 trillion, driven by increased consumer spending during the Easter period.
In May and June, the figures climbed even higher, with May seeing N3.97 trillion and June recording N4.04 trillion in circulation.
Each month has seen a consistent rise in the amount of currency outside banks, reflecting the cash-dependent nature of Nigeria’s economy.
For years, the Central Bank has been promoting initiatives aimed at reducing the amount of cash in circulation and encouraging more Nigerians to use formal banking channels.
The introduction of cashless policies, mobile banking, and digital payment platforms were part of this effort.
The CBN has also introduced measures like the Point of Sale (POS) system and the use of Quick Response (QR) codes to make banking services more accessible to the population, especially those in rural areas.
But despite these efforts, many Nigerians, especially in rural and informal sectors, still prefer cash transactions.
The lack of trust in the banking system, poor access to financial services, and technological challenges have all contributed to the slow adoption of digital payments.
The CBN said: “We recognize that the large amount of currency outside the banks is an ongoing issue, and we are committed to driving financial inclusion. We are working on new policies that will make banking more accessible and attractive to Nigerians.”
One of the measures the CBN has been pursuing is the introduction of incentives for people to deposit their money in banks.
The CBN hopes that by offering benefits like reduced transaction fees and better interest rates on savings accounts, more people will be encouraged to use the banking system.
The apex bank has also been working with fintech companies to develop more accessible and user-friendly financial products.
Nigeria’s informal economy is one of the largest in Africa, with millions of people operating businesses that do not fall under formal government regulations.
These businesses often rely heavily on cash transactions, which makes it difficult for the government and financial institutions to monitor the flow of money.
Experts say that the size of Nigeria’s informal economy is a significant reason for the large amount of currency outside banks.
Most people in the informal sector prefer to keep their money in cash because they either do not trust banks or lack easy access to them.
