Emmanuel OchayiNigeria’s cash scarcity continues to worsen despite a sharp rise in the amount of currency held outside banks. Data from the Central Bank of Nigeria (CBN) shows that over 90% of the country’s cash remains outside formal financial institutions.
According to the CBN’s money and credit statistics, currency outside banks rose to N4.29 trillion in October 2024. This accounts for 94.3% of the total currency in circulation, which stands at N4.55 trillion.
Join our WhatsApp ChannelThe data highlights a notable increase from October 2023, when currency outside banks was N2.70 trillion — a 59% rise within a year. This trend poses significant challenges for Nigeria’s cashless policy, as most of the country’s cash remains in public hands instead of banks.
Financial expert and President of the Association of Senior Staff of Banks, Insurance, and Financial Institutions, Olusoji Oluwole, attributed the worsening cash shortage to the CBN’s failure to meet the cash demands of commercial banks.
CBN Takes Action Against Naira Hawking, Fines Banks N150 Million Per Branch
As cash scarcity continues, the Central Bank of Nigeria (CBN) has introduced strict penalties on Deposit Money Banks (DMBs) for aiding the illegal trade of naira notes. The CBN announced that any bank branch found facilitating the flow of mint naira notes to currency hawkers will face a N150 million fine for the first violation.
The directive was contained in a circular issued on December 13, 2024, and signed by Mohammed Olayemi, the acting Director of the Currency Operations Department.
The CBN stated that the illegal hawking of naira notes had become a serious problem, obstructing the fair distribution of cash to customers and businesses.
The circular reads, “CBN will continue to intensify the periodic spot checks to the banking halls/ATMs to review cash payouts to banks’ customers, as well as mystery shopping to all identified cash hawking spots across the country.”
The apex bank also warned that repeat offenders would face stricter sanctions under the Banks and Other Financial Institutions Act 2020 (BOFIA 2020).
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CBN’s Strategy to Curb Illicit Naira Trade
To ensure compliance, the CBN announced plans to conduct spot checks at bank branches and deploy “mystery shoppers” to monitor banking halls and ATMs. These undercover agents will help identify areas where hawking of the naira is taking place.
The CBN stated that any bank branch or financial institution caught assisting in the illegal sale of naira notes would face a fine of N150 million for the first offence. Subsequent violations would attract harsher penalties under the provisions of BOFIA 2020.
The CBN’s crackdown is part of a broader strategy to ensure that naira notes are distributed fairly and made available to customers through formal financial channels.
Why Cash Shortage Persists Despite Cashless Policy Push
Despite the CBN’s efforts to promote a cashless economy, most Nigerians still rely on cash for daily transactions. This reliance is reflected in the growing volume of currency outside banks.
In September 2024, currency outside banks stood at N4.02 trillion, which was 93.1% of the total currency in circulation. This figure increased to N4.29 trillion by October 2024, representing a 6.8% rise within one month.
When compared to September 2023, there was a 66.3% increase in currency outside banks. In August 2024, it was N3.87 trillion, representing 93.3% of the currency in circulation.
Analysts argue that the cash shortage is the result of a combination of factors, including the public’s preference for cash, the inability of banks to meet customers’ cash demands, and the continued hawking of naira notes.
CBN Urges Banks to Comply or Face Stricter Sanctions
The CBN’s directive is clear — banks must ensure that naira notes are not illegally traded. To enforce this, the apex bank will conduct random checks on bank branches and ATMs, with a focus on identifying any links between bank staff and naira hawkers.
According to the CBN, failure to comply with this directive will result in fines and other penalties as outlined in the BOFIA 2020 Act. The CBN’s move is expected to reduce the amount of cash circulating outside banks, promote cashless transactions, and ensure equitable access to cash for Nigerians.
The coming weeks will reveal whether this new approach will reduce the country’s ongoing cash scarcity and curb the illicit naira trade.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
