The Chief Economist at Zenith Bank, Marcel Okeke, highlighted the implications of this issue, noting that the large volume of money outside the formal banking sector complicates the CBN’s policy objectives.

“The money in circulation, whether within or outside the banking system, has no direct relation to recapitalisation,” Okeke said. “However, a significant amount of money remains outside the banking system, particularly in rural areas where people haven’t developed banking habits.”

He said the presence of such a large amount of unbanked currency limits the CBN’s control over key financial metrics, such as the Cash Reserve Ratio, and weakens its ability to influence economic activities.

“The CBN may struggle to effectively implement its policies to manage excess liquidity due to the significant presence of the informal sector,” Okeke added.

To address this issue, the CBN has been promoting financial inclusion through campaigns aimed at educating and encouraging banking in remote areas.

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