The Central Bank of Nigeria (CBN) has disclosed that the total currency in circulation has surged to N4.1 trillion, with a mere 6% held within the banking system. This revelation comes as part of the CBN’s ongoing efforts to monitor and regulate the flow of money across the economy.

In a report released by the apex bank, it was highlighted that the bulk of the Naira is in the hands of individuals and businesses rather than being deposited in banks. This trend signals a potential liquidity strain on the banking system and raises concerns about the efficacy of recent monetary policies aimed at improving cash flow and reducing reliance on cash transactions.

The CBN has been implementing several measures to encourage the public to adopt digital and banking channels for their transactions. However, the latest figures suggest that a significant portion of the population continues to prefer cash-based transactions, further exacerbating issues related to inflation and economic control.

Experts suggest that the low percentage of currency in banks reflects ongoing trust issues in the formal banking sector and the inefficiencies of the banking system to attract deposits. This has fueled a high rate of informal financial activity, making it difficult for authorities to implement effective monetary policy.

The CBN reaffirmed its commitment to pushing financial inclusion and increasing liquidity in the banking sector. However, the growing volume of currency outside the banking system presents a major challenge as the country grapples with inflationary pressures and the depreciation of the Naira.

As the situation develops, analysts believe that there will be heightened focus on the CBN’s cashless policy and efforts to reduce dependency on physical cash.