Digital Payments Push Fails to Deter Demand for Cash in Nigeria

Emele Onu, Bloomberg News

$A vendor wearing protective latex gloves holds Nigerian naira banknotes and a contactless payment terminal in a store in Lugbe district in Abuja, Nigeria, on Wednesday, June 3, 2020. The government of Nigeria, whose revenue could be slashed by more than half this year due to the oil-price slump, finalized plans for a revised budget that keeps spending almost intact, and that will mean more borrowing. Photographer: KC Nwakalor/Bloomberg$

A vendor wearing protective latex gloves holds Nigerian naira banknotes and a contactless payment terminal in a store in Lugbe district in Abuja, Nigeria, on Wednesday, June 3, 2020. The government of Nigeria, whose revenue could be slashed by more than half this year due to the oil-price slump, finalized plans for a revised budget that keeps spending almost intact, and that will mean more borrowing. Photographer: KC Nwakalor/Bloomberg , Bloomberg

(Bloomberg) --

Cash in circulation in Nigeria rose to a record in October despite a push by authorities to engender cashless transactions and control money supply in Africa’s most populous nation.

The amount of naira notes and coins circulating in the economy increased 4.6% to 3 trillion naira ($7.3 billion) in October from the previous month, according to the Central Bank of Nigeria data. Broad money supply, or M2, surged to a record 41.4 trillion naira in the same month.

Nigeria in October introduced a digital currency, while a host of financial-technology companies are trying to woo residents in a nation where 36% of adults don’t have access to banking services. But cash is still the main mode of transaction, especially in rural areas. The jump in money supply also raises the risk of inflation, which at 15.99% has exceeded the central bank’s single-digit target for six years.

The regulator has kept the policy rate unchanged at 11.5% since last year in a bid to rein in price rises.

Nigeria’s eNaira, which the central bank hopes will expand digital payments, reduce cost of printing and processing cash and deepen financial inclusion, lured about half a million people on the digital platform as of mid-November.

Meanwhile, fintech firms such as TeamApt Ltd. and OPay are attracting private equity funds as they scale up in the continent’s biggest economy.

Read: E-Naira Lures About Half a Million People Weeks After Its Launch