Connect with us

News

Naira: Currency In Circulation Jumps N2.5 Trillion

Published

on

Naira: Currency In Circulation Jumps N2.5 Trillion

The latest data from the Central Bank of Nigeria (CBN) has shown that the currency in circulation (CIC) reached a year high of N2.5 trillion in May 2023, up by 7.4% from N2.3 trillion in January 2023.

The CIC comprises the currency outside the banking system and the vault cash of banks.

The total money supply in the country however fell slightly for the first time since July 2022 to N55.5 trillion. It was N55.6 trillion in April 2023.

Read Also: Peter Obi Comments On Alaba Int’l Market Demolition By Lagos Govt

According to the data seen by Nairametrics, currency in circulation rose from N2.3 trillion to N2.5 trillion the highest recorded in 2023, and since the supreme court reversed a CBN policy on new naira notes.

Meanwhile, currency outside banks also rose to N2.1 trillion in May from N2 trillion at the end of April 2023.

Read Also: Transfer: Juventus Sign Liberian President’s Son, Tim Weah

Currency in circulation in Nigeria has been on the rise since the supreme court ruled against the new naira notes policy introduced by the apex bank in late 2022.
The policy had been largely criticized by most Nigerians due to its poor implementation and the spate of scarcity it created across several cities in the country.
The central bank stated that the policy was introduced to curb excess money supply, especially physical cash which it claimed contributed to inflation.

Read Also: Discord Hits Adeleke’s Associate, SSG Over Political Appointments, Relegation Of Office

The rise follows the Supreme Court ruling
The spate of rise in currency in circulation suggests the country is gradually going back to trends recorded in 2022 when the currency in circulation grew month and month climaxing to about N3.3 trillion in May 2022.

Between February when the currency in circulation was around N982 billion and May this year, currency in circulation has risen by 50%, the fastest we have seen in recent years.

In fact, between the 29% month-on-month drop in February, currency in circulation rose 71% to N1.6 trillion in March and 41% from March to N2.3 trillion in April 2023.
Currency outside banks has also risen in a similar trend growing by 71% and 44% month on month in March and April 2023 respectively.

Nairametrics analysts also opine the sharp rise in currency in circulation may also be due to the effect of the central bank policy as more Nigerians may have been dissuaded from saving in banks.

Read Also: Kyari, Emefiele: Why The Differences Are Clear -Skymark Energy Boss, Muhammad Saleh Hassan

What this means: The recent surge in currency in circulation in Nigeria, accompanied by the rise in currency outside banks, has significant implications for inflation management and exchange rate depreciation.

The increase in physical cash flow, following the Supreme Court ruling against the new naira notes policy, challenges the effectiveness of the measures implemented by the Central Bank of Nigeria (CBN) to control inflation.

As the availability of physical cash grows, there is a possibility of increased demand for foreign currencies, potentially impacting the exchange rate.

Policymakers must closely monitor these developments to ensure effective inflation management and maintain exchange rate stability, fostering a healthy economic environment for Nigeria.

Lower interest rates on customer deposits also affect the increase in money supply as Nigerians prefer to keep their cash than invest in fixed-income securities.

There is also fear that this could compound Nigeria’s exchange rate situation.

Hammed Tajudeen is a graduate of Osun State Polytechnic, Iree with Higher National Diploma (HND) in Mass Communication

Follow us on Facebook

Trending