CBN Makes Declaration On Circulation Of Cash Outside Banks, Reveals Shocking Details
The Central Bank of Nigeria (CBN) has disclosed that 94% of the nation’ s cash circulation exists outside the banking system, amounting to an astonishing N4. 29 trillion by October 2024. This figure highlights a growing trend where Nigerians increasingly rely on physical cash, posing challenges to financial system modernization. The CBN’ s data reveals a significant year- on- year increase of N1. 59 trillion in cash outside banks compared to N2. 70 trillion recorded in October 2023, where 89. 6% of cash also remained outside banks.
Further analysis shows that the total currency in circulation in October 2024 stood at N4. 55 trillion, with N4. 29 trillion outside banks. Month- on- month, the figure increased by 6. 8% or N270 billion from September 2024, when N4. 02 trillion, or 93. 1% of cash, was outside the banking system. This pattern indicates a persistent reliance on cash, with September 2024 recording a 66. 3% year- on- year rise compared to N2. 42 trillion in September 2023, where 87. 5% of the total currency also bypassed banks.
The trend of cash hoarding extends further back. In August 2024, N3. 87 trillion in cash was outside banks, representing 93. 3% of the N4. 14 trillion total currency in circulation. This marks a dramatic 73. 9% year- on- year increase compared to N2. 22 trillion in August 2023, when 83. 6% of cash was outside banks. Similarly, July 2024 witnessed N3. 67 trillion outside banks, accounting for 90. 5% of the N4. 05 trillion in circulation, further reinforcing this growing reliance on physical cash.
Experts attribute this trend to systemic inefficiencies and a lack of trust in the banking system. Despite the CBN’ s push for cashless transactions and financial inclusion, Nigerians continue to prefer cash due to issues like limited access to banking services, inconsistent electronic transaction networks, and cultural habits. The President of the Association of Senior Staff of Banks, Insurance, and Financial Institutions, Olusoji Oluwole, emphasized the worsening cash shortages in commercial banks, citing the CBN’ s inability to meet cash demands.
The growing volume of cash outside banks undermines Nigeria’ s efforts to modernize its financial systems and transition to a cashless economy. Such a situation creates challenges for monetary policy implementation, limits economic growth, and encourages informal sector activities. Addressing this issue requires a multi- faceted approach, including improving banking infrastructure, fostering trust in electronic transactions, and expanding financial literacy across the country.
This reliance on cash reflects broader economic and infrastructural challenges, raising critical questions about the efficiency of Nigeria’ s banking system and the effectiveness of policies aimed at curbing cash dependency. As the CBN strives to adapt its strategies, the nation’ s financial future hinges on its ability to address these systemic issues.
