As of November 2023, about 92 per cent of the currency in circulation (CIC) exists outside the banking system, according to data from the Central Bank of Nigeria (CBN).
This marks a significant increase from the 86 per cent recorded in October 2022, just before the implementation of the CBN’s naira redesign policy.
The CIC experienced a notable surge, rising by 21.37 per cent in less than three months, reaching N3.35 trillion in November 2023. The cash outside banks also saw a 27.80 per cent increase, reaching N3.08 trillion in the same period.
This shift in non-bankheld cash comes amid concerns over the sufficiency of currency within the banking system.
In response to reports of cash scarcity, the CBN issued a statement in November 2023, reassuring the public of an adequate currency stock and advising against panic withdrawals.
The shortage of cash at banks, ATMs, Points of Sale, and Bureaux de Change across major cities in Nigeria has posed challenges for banks, struggling to meet customer withdrawal demands.
The former CBN governor, Godwin Emefiele, had highlighted the prevalence of N1,000 and N500 bills in circulation as a factor contributing to inflationary pressure during a Monetary Policy Committee (MPC) meeting in October 2022. He announced the redesign of banknotes and the introduction of new notes.
The CBN’s naira redesign policy initially led to a reduction in the country’s currency supply, from N3.29 trillion in October 2022 to N1.38 trillion by the end of January 2023. However, with the change in leadership at the apex bank, it appears that more cash is being allowed to circulate.
The central bank also removed the deadline for the legal tender status of old N200, N500, and N1000 notes, indicating a potential end to the cash scarcity crisis faced earlier in the year.
The trend suggests a behavioral pattern among Nigerians, indicating an increase in hoarding cash outside the banking system, contributing to the current cash scarcity challenges in the country.
The CIC reached a new year high of N3.4 trillion as of December 11, 2023, suggesting a continuous increase in cash hoarding
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