CBN assures of deposits’ safety amid cash squeeze

Amid repeated assurance by the Central Bank of Nigeria (CBN) that there is enough cash in circulation, Nigerians continue to groan over the scarcity of cash.

In Abuja, most sellers without payment options have resorted to sharing point-of-sale (PoS) machines with fellow traders to remain in business. This is becoming a norm in Wuse – the biggest market in the central area of the city.

The Chief Executive Officer of Dairy Hills Limited, Kelvin Emmanuel, said he does not believe that the shortage of cash has anything to do with collusion between deposit money banks (DMBs) and agent banks otherwise known as PoS.

“It is important to note that the Central Bank has embarked on a mop of excess liquidity through open money market operations, as a tool to reduce money supply from the current 36 per cent and slow down inflationary pressure that is cash induced.
“It is important for the government to realise that the supply side economics that is due to the fiscal side supply chain issues and the encumbrances the Central Bank has had with foreign exchange liquidity have impacted on the exchange rate and exposed Nigeria’s supply chain to inflation. Attempting to fight inflation by reducing money supply alone without focusing on fiscal buffers, will lead to the kind of shortage in cash we are seeing now,” he said.

Also, an investment banker, Tolulope Alayande, blamed the scarcity on the rising inflation.

He explained: “To me, it does appear that the naira in circulation is not able to carry the weight of cash needed in the economy. Even the N2 trillion in circulation is not enough. Government devalued the naira which means more naira will be needed to buy goods and services. The quantity of the naira that is needed to buy things has tripped in the last few months.

“Then, the additional pressure of the yuletide is another challenge. It is generally known that what is called the ‘Christmas economy’ will happen around this time. Therefore, more cash will be needed now. The CBN did not get its anticipation right. More cash ought to be injected into the economy which has not happened hence the shortage we are experiencing. It is a function of demand and supply.”

The explanation comes as the CBN has responded to insinuation that the federal government plans to take over some CBN-supervised financial institutions.

The Acting Director of Corporate Communications of the apex bank, Sidi-Ali Hakama, said in Abuja yesterday that Nigerian banks remain safe and sound.

“The CBN encourages the public to continue their regular activities without being alarmed by reports that have not emanated from the CBN about the health status of Nigerian banks. The CBN is fully equipped to carry out its statutory duty of upholding a stable financial system in Nigeria. We assure the general public and depositors about the safety of their funds in Nigerian financial institutions.
“Bank customers are therefore advised to proceed with their banking transactions as usual, as there is no cause for concern,” she said.