The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has clarified that the scarcity of lower naira denominations is driven by declining demand rather than a deliberate withdrawal of the notes and coins from circulation. He made this statement on Tuesday during a press briefing at the end of the 306th Monetary Policy Committee (MPC) meeting in Abuja.
Legal Tender Status Confirmed
Mr. Cardoso emphasized that lower denomination notes and coins remain legal tender. “They are still legal tender. To the extent that the Central Bank has not said otherwise, please assume they are legal tender,” he said in response to a question about their validity for transactions. This follows a previous CBN confirmation on July 8 that 100 naira notes remain legal tender, warning against their rejection by Nigerians.
Demand and Supply Dynamics
The CBN governor explained that the availability of lower denominations is largely determined by public demand within the payments ecosystem. “The question as to why we do not have as many of them in circulation as may be perceived is a question of demand and supply, quite frankly,” he stated. He attributed the reduced demand to the increasing adoption of electronic payment channels, which is reducing the need for cash, particularly lower-value notes and coins.
Mr. Cardoso noted that the financial system is evolving towards digital transactions, aligning with the CBN’s goals for financial inclusion. “The ecosystem is moving, as indeed we want it to move, to one of financial inclusion where digitisation is becoming increasingly important to many. If there is no need for coins or for lesser denominations, then there is no need to have them,” he added.
Payments System Vision 2028
Mr. Cardoso highlighted the Payments System Vision (PSV 2028), recently unveiled by the CBN, which sets ambitious targets for expanding financial inclusion over the next two years. He predicted that the growing adoption of digital payment channels would further reduce demand for small denomination currency. “I think that for those of you who have followed the recent launching of our payments vision for the next two years, you’ll find that we have set ourselves a very ambitious goal to increase financial inclusion. I sense that you are likely to find less and less demand for these denominations,” he said.
Global Trend Towards Digital Payments
The CBN governor acknowledged that the depreciation of the naira has affected the purchasing power of lower denomination notes, but maintained that the broader global trend favors digital payments over cash. He noted that in several advanced economies, some businesses no longer accept cash, describing the transition towards electronic payments as an inevitable direction for Nigeria, though he stressed that the change would not happen overnight.
“The world is moving in a particular direction, and we won’t be left out. I’m not saying that these things will happen overnight in the case of Nigeria, but that is the way the world is going. Today, people can travel abroad and make payments with their naira cards. Those going on Hajj or pilgrimage can also use their cards. Generally, you can see the world is converging around digitisation,” Mr. Cardoso said.
