As the spate of kidnaping for ransom and other criminal activity in the country spiral out of control, experts in the financial service sector have linked the menace to increase in currency circulating outside banks, which climbed to record high as of Q4 2023
This correlation comes as questions swirl around the reversal of the Central Bank of Nigeria’s (CBN) cashless policy, which previously imposed limits on cash withdrawals and encouraged digital transactions.

Recently, data released by the central bank indicated a substantial surge in currency held outside the banking system as at Q4 2023, reaching unprecedented levels in historical comparison.

According to the central bank data, the total currency in circulation (CIC) as at November, 2023 stood at N3.35 trillion, with currency outside the banks amounting to N3.08 trillion, representing a substantial 92 per cent of the total CIC.

In an interview with THISDAY, the Group Chief Executive officer, Cowry Assets Management, Johnson Chukwu said: “Remember that during the cashless policy, we almost eliminated incidents where people came to people’s homes to rob them of cash. So we eliminated robbery at homes and highway robbery because the robbers knew that the chances that they would get cash were minimal. But now if you reverse that process, you’re going to have those crimes come back. So you’re not just going to deal with kidnapping for ransom. You may also deal with highway robbery and robbers come into homes because they expect people to keep cash.”

He added that the cashless policy of the government had very positive security implications and maintained that he supported the cash withdrawal limits for corporates and personal transactions.

He added: “Unfortunately, the current CBN has revised that which means it’s an intentional act to allow cash outside the banking system. What we are witnessing now is it designed by the current administration of the central bank by reversing the entire cashless policy and removing all penal charges for cash withdrawal and cash lodgment.

“So, once you do that, you have unwound years of cultural change, or attitude change that had been implemented from the Sanusi era to the now. So it’s not strange that we’re seeing an increase in the volume of cash outside the banking system. Also, remember, that there is a transaction charge for every transaction with the bank. So an average businessman who will want to bypass, circumvent or avoid the charge if there is no penalty for keeping cash. And as you rightly said, we’re seeing an increase in kidnapping for ransom because if they know that they can get cash from you they don’t need to lodge the cash into the banking system.”

On her part, Senior Associate at Parthian Partners, Okiki Oladipo said: “While there could be potential correlation between the rise in currency circulation and insecurity, there are other factors that could contribute to this.

“The Stanbic IBTC bank Nigeria PMI’s data for March 2023 recorded a contraction of 42.3 per cent, after which we started to see expansions with a high of 54 per cent in May 2023. This connotes an improvement in the performance of the private sector, also drawing an inference of increased activities in the informal sector, where cash transactions are a norm,” he said.

“Hence, to curtail the upward trend of currency outside the banking system, the issues surrounding accessibility would have to be addressed. More efforts in the line of what is being done by the Payment Service Banks (PSBs) should be further propagated, to capture more people and businesses within the financial system,” she said