The push for digital payments in Nigeria has failed to deter the demand for cash as proposed by the Central bank of Nigeria (CBN). Despite the push by the authorities to engender cashless transactions and control the supply of money in the Country, cash circulation is still on the rise.
According to a report in October, the amount of naira notes and coins circulating has increased by 4.6% to $7.3 billion within the economy from the previous month based on the data by the Central Bank of Nigeria (CBN). M2 or broad money supply rose to a record of about N41.4 trillion in the same month.
Increasing Cash Demands
The increase in the demand for cash causing Nigeria’s currency-in-circulation indicates the lag in the digitization of Naira (digital payment) and monetary control.
In October 2021, Nigeria introduced a digital currency (e-Naira) while a host of Fintech companies are making efforts to pitch to residents of the nation where about 36% of grown-ups have no access to banking services yet cash is still the main mode of transaction especially in the rural areas.
The rise in the money supply also spiked the risk of inflation which at 15.99% has exceeded the Central Bank’s single-digit target for 6 years. The regulators have strived to keep the policy rate unchanged since last year at 11.5% in a bid to rein in on the price rise.
The Central Bank of Nigeria (CBN) had hope that the advent of the digital currency, e-Naira, will expand the digital payments thereby reducing the cost of printing and cash processing as well as aid to deepen financial inclusion luring about half a million (500,000) people on the digital platform as of the Middle of November.