Nigeria faces a troubling paradox. Despite currency circulation reaching a record high of ₦4.5 trillion in October 2024—a 4.7 percent increase from the previous month—cash scarcity continues to plague the nation. Nigerians endure long queues at banks and ATMs, often leaving without cash or with meagre amounts that are insufficient for their needs. For many, accessing their own money has become a frustrating ordeal, forcing them to rely on mobile money agents who charge exorbitant fees.
This paradox of cash abundance alongside scarcity is not just an inconvenience; it reflects a deeper dysfunction in Nigeria’s financial ecosystem. At its core, the crisis exposes systemic failures in currency management, trust in digital payment systems and the effective enforcement of monetary policies.
“At its core, the crisis exposes systemic failures in currency management, trust in digital payment systems, and the effective enforcement of monetary policies.”
The human cost of this cash crisis is profound. It directly impacts everyday Nigerians, particularly traders, small business owners, and low-income earners whose livelihoods depend on cash transactions. For these groups, cash scarcity is not just a disruption; it is a threat to survival. Akpan Nadana-Abasi, a customer at a Lagos bank, vividly recounts being denied access to the ₦20,000 he needed and offered only ₦5,000 instead. His frustration is mirrored by countless others who face similar indignities at banks, often forced to negotiate or accept cash in impractical denominations. Such scenarios exemplify a financial system that prioritises inefficiency over service delivery.
The Central Bank of Nigeria (CBN) has attempted to address the crisis by imposing punitive measures, such as fines of ₦150 million on banks accused of hoarding or diverting cash to illicit markets. While these measures are a step in the right direction, they remain reactive, addressing symptoms rather than the structural issues at the heart of the crisis. The fact that ₦4.3 trillion—a historic high—remains outside the banking system highlights significant shortcomings in regulatory oversight and public trust. As Professor Ijeoma Kalu aptly notes, the unchecked flow of currency outside banks undermines monetary policy, rendering tools like the cash reserve ratio and lending rates ineffective.
Compounding these challenges is the commodification of the Naira. In certain quarters, banknotes are sold at a premium, turning currency into a black-market commodity. This practice not only undermines public confidence but also jeopardises economic stability. Banks themselves have not been blameless. Stories of empty ATMs, rationed withdrawals, and unclear processes point to a lack of operational efficiency and accountability. These practices betray the trust of customers, the foundation on which any banking system must rest.
To address this crisis, Nigeria must embrace a multifaceted approach. Strengthening cash management systems is critical. The CBN must implement robust monitoring mechanisms to track the flow of currency and prevent hoarding and diversion. Public education campaigns are equally important to encourage citizens to report illegal activities and to restore confidence in the financial system.
The transition to a cash-lite economy, long championed by the CBN, must also be accelerated. A functional digital payment infrastructure is no longer a luxury but an imperative. Kenya’s M-Pesa serves as an exemplary model, demonstrating how mobile money can drive financial inclusion and reduce dependency on physical cash. For Nigeria to replicate such success, it must invest in reliable digital platforms, ensure nationwide internet connectivity, and lower transaction costs to encourage adoption.
Public communication is another key area that demands urgent attention. The CBN must clarify the status of all Naira denominations to address lingering confusion following the Supreme Court’s ruling on the indefinite circulation of older notes. Mixed messaging undermines public confidence and disrupts commerce. A focused and consistent communication strategy can help dispel misinformation and ensure smooth currency circulation.
Collaboration between the government, banks, and fintech companies is vital to creating a financial ecosystem that prioritises accessibility and efficiency. Public-private partnerships can drive innovation in payment systems, enabling digital platforms to reach underserved areas and fostering an environment of inclusivity. Financial institutions must also take greater responsibility. Regular audits, transparent reporting of cash availability, and a customer-centric approach should become standard practices. Banks that fail to meet these benchmarks must face not only fines but also public accountability.
Read also: High currency in circulation fails to tame cash scarcity
This crisis also serves as a litmus test for Nigeria’s leadership. The CBN and commercial banks must demonstrate a genuine commitment to addressing systemic flaws rather than relying on short-term fixes. Policymakers must ensure that regulatory frameworks are enforced rigorously while remaining adaptable to emerging challenges.
Ultimately, solving Nigeria’s cash crisis requires a holistic strategy that addresses immediate shortages and implements long-term reforms. Strengthened cash management, expanded digital payment systems, clearer communication, and greater accountability within the banking sector are all essential. But perhaps most importantly, the solution lies in restoring trust. Without it, no amount of currency in circulation can ensure a functional financial system.
Nigeria’s cash crisis is a paradox of abundance and scarcity that reflects deeper inefficiencies in its financial ecosystem. It is a stark reminder of the urgent need for reform—not just to alleviate immediate pain points but to build a system that works for all Nigerians. With over 220 million citizens depending on effective financial services, the stakes have never been higher. It is time for bold and decisive action to break this paradox and secure Nigeria’s economic future.
To achieve this, the government and the Central Bank of Nigeria must collaborate to implement a comprehensive strategy that addresses the root causes of the crisis. This includes strengthening regulatory oversight, promoting financial inclusion, and fostering a culture of transparency and accountability. By investing in digital infrastructure, promoting financial literacy, and supporting innovation in the fintech sector, Nigeria can create a more efficient and resilient financial system.
The time for half-measures is over. The future of Nigeria’s economy depends on its ability to overcome this crisis and build a financial system that serves the needs of all its citizens.
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