A worrying trend of increased cash hoarding has emerged in Nigeria, with up to 94% of the currency in circulation being stored outside banks by March 2024, according to recent data from the Central Bank of Nigeria (CBN).
The data reveals a steady rise in cash hoarding, with percentages climbing from 90% in January 2024 to 94% by March, indicating a growing lack of confidence in the banking system or a preference for cash transactions amidst economic uncertainties.
Notably, the surge in currency circulation has doubled from January 2023 to January 2024 and further increased by 130% by March 2024. Similarly, currency held outside banks has surged by 150% over the same period.
This behavior stems from the cash scarcity experienced in 2023, attributed to the CBN’s flawed implementation of a naira redesign policy. The persistent skepticism towards the banking system poses challenges, including restricted money circulation, higher transaction costs, and reduced credit availability, ultimately slowing economic activity.
Despite earlier measures by the CBN to address cash hoarding, including suspending processing charges on large cash deposits, Nigerians continue to stash cash at home rather than depositing it in banks.
The rising trend of cash hoarding underscores the urgent need for policymakers to address underlying issues and restore trust in the banking sector, ensuring the efficient circulation of money and promoting economic growth.
