Nigeria’s currency outside the banking system surged to an unprecedented N4.2 trillion as of October 2024, defying several Central Bank of Nigeria (CBN) policies aimed at reducing cash in circulation.
According to the latest money supply data from the CBN, total cash in circulation and outside the banking system has exceeded N4 trillion, continuing a steady rise that began after the cancellation of the controversial cashless policy implemented by the previous administration.
This marks a significant increase from an all-time low of N792 billion in January 2023, when new Naira notes were introduced, and older notes were scheduled for withdrawal. The record-high cash supply reflects a reversal of the earlier contraction.
Challenges Persist Despite Cash Surge
Despite the increase in cash, Nigerians continue to face challenges accessing funds. Point of Sale (POS) operators charge fees as high as 5% for cash withdrawals, while Automated Teller Machines (ATMs) remain plagued by persistent shortages.
Key Insights from the Data
Data reviewed by Nairametrics indicates that the currency outside the banking system rose to N4.2 trillion in October 2024, up from N4 trillion in September 2024. Total currency in circulation also increased to N4.5 trillion in October, compared to N4.3 trillion in the previous month.
The CBN defines currency outside banks as all cash held by individuals, businesses, and institutions that is not stored in the banking system. On the other hand, currency in circulation includes cash held by the public and cash retained by banks as vault cash.
Nigeria’s total money supply stood at N107.6 trillion in October 2024, slightly lower than the N109.4 trillion recorded in September 2024.
Hawkish Policies Failing to Curb Cash in Circulation?
The steady increase in cash outside the banking system raises questions about the effectiveness of the CBN’s hawkish monetary policies. The Bank has implemented measures aimed at sterilizing cash from the economy, including raising the Cash Reserve Ratio (CRR). At the Monetary Policy Committee meeting held on September 24, 2024, the CRR for Deposit Money Banks was raised by 500 basis points, from 45% to 50%, and for Merchant Banks by 200 basis points, from 14% to 16%.
These moves were intended to restrict liquidity, but currency outside banks has increased by 25% this year. The availability of cash has likely contributed to Nigeria’s persistent inflation, which has remained elevated throughout 2024.
POS Operators’ Dominance and Public Frustration
Despite record-high cash levels, Nigerians continue to struggle with limited access to funds through ATMs. Long queues at ATM terminals are common, with many machines out of service or displaying “no cash available” notices. As a result, many Nigerians rely on POS operators for cash withdrawals, often at exorbitant charges ranging from 5% to 10% of the transaction amount.
Social media is awash with complaints of alleged collusion between banks and POS operators, with claims that banks prioritize supplying cash to POS operators who impose higher withdrawal fees. Critics argue that this practice incentivizes cash hoarding by POS operators, exacerbating the scarcity of cash at ATMs and adding to public frustration.
The situation has led to widespread calls for regulatory intervention to ensure fair access to cash and address the exploitative practices reportedly perpetuated by some stakeholders in the financial system.
