In a startling revelation, the Central Bank of Nigeria (CBN) has disclosed that Nigerians are holding onto cash at an unprecedented rate, with a staggering 94 percent of the currency remaining outside the banking system.
The findings, outlined in the CBN’s March 2024 Money and Statistics data, underscore growing concerns about declining trust in the banking sector and potential threats to the nation’s economic trajectory.
According to data published on the CBN’s official website, the volume of physical money (M1) in circulation has witnessed a remarkable surge compared to the previous year. In January 2024, M1 stood at N3.65 trillion, marking a more than twofold increase from the N1.39 trillion recorded in January 2023.
This trend persisted throughout the quarter, with March 2024 figures soaring to N3.87 trillion, reflecting a staggering 130 percent surge year-on-year.
While the CBN has injected additional cash into the system, the amount held by outside banks has outpaced these efforts. In January 2024, N3.28 trillion was held outside the banking system, compared to N792.18 billion just a year earlier. By March 2024, this figure had surged to a concerning N3.63 trillion, indicating a 150 percent increase year-on-year.
This trend suggests that Nigerians are hoarding cash at a rate surpassing the CBN’s endeavours to boost circulation.
This behaviour can be traced back to the severe cash scarcity crisis experienced in 2023. The CBN’s implementation of a naira redesign policy, aimed at promoting a cashless economy and curbing criminal activities, resulted in widespread disruption and a loss of confidence in banks.
Concerns regarding the validity of old notes and challenges in accessing cash fueled a pervasive hoarding mentality that persists today.
The CBN has previously acknowledged the issue, citing “high volume withdrawals” from banks and “panic withdrawals” by customers. Despite efforts to address the situation and the suspension of fees on large cash deposits, Nigerians remain apprehensive about returning their funds to the banking system.
