Cash Hoarding and Crypto Gambling Erode CBN's Power to Spur Growth

Over 90% of Nigeria's ₦4.47 trillion cash supply is now held outside banks, according to the Central Bank of Nigeria (CBN), highlighting a deepening reliance on physical currency and informal financial channels. The CBN's latest Money and Credit Statistics report reveals that ₦4.47 trillion—90.2% of the ₦4.95 trillion in circulation—resides in the hands of individuals, businesses, and informal traders, according to a Technext report. This trend underscores persistent distrust in the banking system and the dominance of cash-based transactions, even as digital payment platforms like Opay and PalmPay gain traction.

The CBN attributes the cash hoarding to structural issues in Nigeria's financial ecosystem. High transaction costs, limited access to reliable digital banking in rural areas, and a history of policy shocks—such as the 2023 naira redesign crisis—have eroded confidence in formal banking. Meanwhile, the CBN's recent tightening of reserve requirements for commercial banks, including a 45% cash reserve ratio, has further constrained liquidity, pushing individuals and businesses to hold cash instead of depositing funds, the Technext report notes. This dynamic limits the central bank's ability to control inflation and stimulate economic growth through conventional monetary tools.

Parallel to the cash trend, Nigeria's Securities and Exchange Commission (SEC) warned about the diversion of household funds into cryptocurrency and gambling. Between July 2023 and June 2024, over $50 billion in crypto transactions flowed through the country, driven by double-digit inflation, a naira that has lost nearly 70% of its value, and widespread poverty. Daily gambling stakes, meanwhile, exceed $5.5 million, with over 60 million Nigerians participating—a figure that dwarfs the less than 3 million who engage in capital market investments, according to a Cryptopolitan report. These activities, the SEC warns, siphon capital away from productive sectors, exacerbating Nigeria's infrastructure financing gap of approximately $150 billion annually, according to a CryptoNewsLand report.

The capital market's underperformance is stark. Listed assets account for just 30% of Nigeria's GDP, compared to 300% in South Africa and 90% in India, a CryptoNewsLand report noted. Dr. Emomotimi Agama, SEC Director-General, emphasized that Nigerians' appetite for risk is evident but misdirected, with citizens favoring immediate gains from crypto trading, forex speculation, and gambling over long-term investments. This misalignment, he noted, stifles capital formation and economic diversification.

Regulators are now pushing to integrate digital assets into the formal system. President Bola Tinubu's revised Investment and Securities Act, enacted earlier this year, brings crypto under SEC oversight without banning it, recognizing its entrenched role in the economy, the CryptoNewsLand report added. The SEC also aims to leverage technology to simplify investment processes and develop new financial products to attract retail investors. However, progress remains uneven. A 2015 Capital Market Masterplan, designed to boost market participation, has only seen half of its 108 initiatives completed, hampered by weak execution and coordination, a Cryptopolitan analysis found.

The interplay of cash hoarding and speculative digital finance paints a complex picture of Nigeria's economy. While the CBN grapples with stabilizing the naira and encouraging digital adoption, the SEC faces the challenge of redirecting risk-taking toward sustainable growth. For now, the dominance of cash and informal channels suggests that structural reforms—and public trust—will take years to reshape Nigeria's financial landscape.