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Naira Redesign Backfires: Nigerians Cling to Cash Despite Push for Cashless Economy

Naira Redesign Backfires: Nigerians Cling to Cash Despite Push for Cashless Economy

Efforts to transition Nigeria towards a cashless society appear to be hitting a snag. Data from the Central Bank of Nigeria (CBN) reveals a record N3.97 trillion in currency outside banks as of May 2024, a significant 70% increase compared to May 2023.

This surge in cash hoarding suggests a growing disconnect between the CBN’s policy goals and the behavior of Nigerian citizens.

The data paints a clear picture: Nigerians are holding onto their cash at an alarming rate. This trend can be traced back to the challenges faced during the naira redesign policy implementation in 2023. Widespread cash scarcity caused frustration and economic disruption, leading many to lose trust in the banking system.

“The cash crunch of 2023 definitely left its mark,” says Dr. Aisha Mohammed, a Lagos-based economist. “People are hesitant to deposit their money in banks, fearing a repeat of that experience.” This sentiment is reflected in the staggering statistic – over 93% of currency in circulation currently resides outside the banking system.

The consequences of such a high cash-to-bank ratio are concerning. A significant amount of money outside the formal financial system limits the CBN’s ability to manage inflation and steer economic growth effectively.

“A cashless economy offers numerous benefits, but the transition needs to be carefully managed,” warns Dr. Mohammed. “Rebuilding public trust and ensuring smooth access to cash are crucial steps.”

Also Read: Currency Outside Banking System Surges by N104.89 Billion in One Month 

The CBN has yet to address the specific reasons behind the cash hoarding phenomenon. However, regaining public confidence in the banking system and ensuring a seamless flow of cash are essential for the success of any future cashless initiatives. Until then, Nigerians appear to be holding onto their cash, a trend that could potentially impede the nation’s progress towards a more digital financial future.

About Bukola Olanrewaju

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