Search Site: OnlineNigeria

Close






CBN raises alarm over funds outside banking system

Posted by By Omoh Gabriel, Business Editor on 2005/01/10 | Views: 328 |

CBN raises alarm over funds outside banking system


LAGOS—NIGERIANS’ penchant to hold money at homes and transact business by cash than keep such money in the bank has increased in the last five years, says Central Bank of Nigeria (CBN) in its monthly financial report.

LAGOS—NIGERIANS’ penchant to hold money at homes and transact business by cash than keep such money in the bank has increased in the last five years, says Central Bank of Nigeria (CBN) in its monthly financial report. Consequently, money outside the banking system has grown by over 100 per cent since the return of civil rule in the country in 1999.

While cash and notes in circulation in 1999 was N393.078 billion, N187.456 billion was held outside the banking system. This implies that 47.4 per cent of money released by the CBN to facilitate the economy was held back. In simple terms, every naira available to the economy in 1999, 47.4 kobo was kept out of circulation by those that preferred to hold on to cash, while 53.3 kobo was available to banks for formal transaction.

According to CBN record, the volume of held cash in year 2000 rose to N274.010 billion. In year 2000, of the N637.731 billion notes and coins supplied by the CBN to the economy, 42.9 per cent was held back as N363.720 billion was within the reach of the various banks in the country. In 2001, the amount of money Nigerians held at homes and under the pillow rose in absolute figure to N338.671 billion or 41.46 per cent of the N816.707 billion notes and coins issued by the CBN to facilitate transactions in the Nigerian economy while a total of N478.036 billion was available through the banking system.

The desire of Nigerians to hold their assets in cash further showed in 2002 when the currency out side the banking system rose to N386.942 billion of the N946.253 notes and coins supplied by the CBN in 2002. This showed that for every one naira released by the CBN in 2002, 40.89 kobo was held by Nigerians, depriving the economy of 40 per cent of financial resources that would have aided investment decisions.

In 2003, N412.155 billion was held back out of the N1.225 trillion that was supplied to the economy. As at November 2004, notes and coins held back from circulation by Nigerians amounted to N407.635 billion. Economists argued that hoarding of money deprived the economy of investable funds as money that would have been made available to investors to expand production through savings was with held by those keeping cash at home and in their offices. Elsewhere in a developed economy, transactions are conducted through plastic money called credit cards and through the banking system by cheque.

Almost all transactions are conducted with cash. The emphasis on cash holding more often than not attracts armed robbers and unnecessary loss of lives.

Read Full Story Here.... :
Leave Comment Here :



Add Comment

* Required information
1000
Captcha Image

Comments (1)

Gravatar
New
Fay(Katy, Texas, US)says...

Actually translates to bravehearted.