Nigeria is currently experiencing a major shortage of cash, even though there has been a notable increase in the amount of money that people are holding outside of banks over the past year. According to the Central Bank of Nigeria, the total amount of cash circulating that is not in banks has reached a staggering N4.29 trillion (which is about $11 million) as of October 2024. This figure represents over 94 percent of all the cash available in the country.
To put this into perspective, just one year ago, in October 2023, the amount of cash held outside banks was about N2.70 trillion, meaning we’ve seen a rise of N1.59 trillion in just one year, which is an increase of 59 percent. This trend shows that more and more people are keeping their money at home or in informal settings rather than depositing it in banks.
Looking at the numbers month by month, in September 2024, the amount of cash outside of banks was N4.02 trillion, which was about 93.1 percent of all the cash in circulation at the time. This was also a significant increase from September 2023, when it was only N2.42 trillion. Comparatively, in August 2024, there was N3.87 trillion outside banks and in July 2024, it was N3.67 trillion. Each of these months shows a substantial rise in the amount of cash people are holding outside the banking system.
Despite government efforts to encourage the use of digital payments and reduce cash reliance, many Nigerians still prefer using cash for their transactions. This situation might slow the country’s transition to more modern banking practices.
One of the reasons for the ongoing cash shortages is that the Central Bank of Nigeria (CBN) has struggled to supply enough cash to the commercial banks to meet customer demands. According to Olusoji Oluwole, who heads the Association of Senior Staff of Banks, Insurance, and Financial Institutions, this inability to provide sufficient cash has worsened the problem.
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Adding to the problem, the CBN recently announced punitive measures against banks. If a bank branch is caught helping in the illegal distribution of new banknotes to currency hawkers (people who sell cash at inflated prices), it will be fined N150 million (about $400,000). Despite this threat, many sellers continue to operate, making it difficult for ordinary citizens to access cash.
The CBN has been increasingly concerned about the rise of hawkers who sell fresh, mint condition banknotes, which disrupts the proper cash distribution to everyday people. They plan to step up monitoring, including surprise checks at banks and ATMs, to identify and penalize banks that might be violating these regulations. Under their new rules, banks found guilty of aiding this illegal cash trade will face severe penalties, and repeat offenders could face even harsher consequences based on previous banking laws.
Overall, the situation reflects a broader struggle in Nigeria as the country attempts to balance the need for enough cash in circulation while pushing for a more modern financial system that minimizes cash transactions.
