Why lower Naira denominations are scarce

The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has attributed the scarcity of lower naira denominations to declining demand, rather than the apex bank’s decision to withdraw the notes and coins from circulation.

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Mr Cardoso made the clarification on Tuesday during the press briefing at the end of the 306th Monetary Policy Committee (MPC) meeting in Abuja.

The development also signalled the country’s gradual shift toward digital payments and broader financial inclusion, the CBN governor said.

On 8 July, CBN confirmed that 100 naira notes remain legal tender, and warned against the rejection of the notes by Nigerians.

Mr Cardoso stressed on Tuesday that the availability of lower denominations is largely determined by public demand within the payments ecosystem.

“They (lower naira denominations) are still legal tender. To the extent that the Central Bank has not said otherwise, please assume they are legal tender,” Mr Cardoso said in response to a question on whether lower denomination notes and coins remain valid for transactions.

Addressing concerns over the possible scarcity of lower denomination notes and coins, the CBN governor said the development reflects demand and supply dynamics as more Nigerians embrace electronic payment channels.

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According to him, the financial system is increasingly evolving towards digital transactions, reducing the need for cash, particularly lower-value notes and coins.

“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. 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 said.

Mr Cardoso noted that the Payments System Vision (PSV 2028), recently unveiled by CBN, places significant emphasis on expanding financial inclusion over the next two years.

He added that the growing adoption of digital payment channels is expected to 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.

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He also acknowledged that the depreciation of the naira has affected the purchasing power of lower denomination notes, but maintained that the broader global trend favours digital payments over cash.

Mr Cardoso noted that in several advanced economies, some businesses no longer accept cash, describing the transition towards electronic payments as an inevitable direction for Nigeria, although 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.