Cash Redesign Shock, Agent Banking and Financial Inclusion in Nigeria

Abstract

This study examined the recent Nigeria cash redesign and rapid growth of agent banking on financial inclusion. The Central Bank of Nigeria's naira redesign established a temporary cash shortage that affected daily cash transactions, even as it aimed to agree with monetary and financial stability. In regards to these effects, Cointegration tests were carried out, using Johansen Cointegration tests, the results confirmed the use of Fully Modified Ordinary Least Squares (FMOLS) as a method to conduct robustness checks using alternative model specifications. Financial inclusion serves the dependent variable while cash redesign shock, density of registered agent outlets as independent variables, moreover inflation and exchange rate as control variables. The analysis uses annual time-series data from 2009 to 2023, soured mainly from International Monetary Fund's IMF Indicators (2023) and the Central Bank of Nigeria's statistical reports. The results show that while the reform initially tightened liquidity and strained transaction activity, agent banking helped cushion the impact by providing practical alternatives for households and businesses. In particular, agents outlets in rural and semi-urban areas became key points of access when cash was difficult to obtain. In conclusion, agent banking can strengthen financial inclusion during policy-driven shocks, however its advantages depend on reliable digital payment infrastructure and an enabling regulatory environment. To maintain progress in inclusion, it suggests strategies to increase the size and professionalism of agent networks, improve the dependability of payment systems, and include financial literacy instruction.