Currency in Circulation Grows amidst Effort to Control Liquidity, Inflation
The total amount of currency in circulation has risen to N3.87 trillion at the end of March, according to the latest money and credit statistics on the website of the Central Bank of Nigeria.
The volume of naira surged despite efforts to control liquidity amidst the rising inflation rate in the country. The currency in circulation surged to N3.87 trillion, a level above N3.69 trillion in February and N3.65 trillion in January, 2024.
Following similar trajectory, total currency outside banks have also increased progressively during the first quarter, growing from N3.28tn in January to N3.41tn and N3.63tn in February and March, respectively.
The data revealed that over 90 per cent of currency in circulation is held outside of the banking system, indicating Nigerians are holding more cash.
In their personal statements, one of the members of the Monetary Policy Committee of the CBN at their March meeting, Muhammad Abdullahi, posited that the apex bank had identified high currency outside banks as one of the monetary drivers of the country’s inflation.
He said, “From available data, prices of domestic food items remain the major driver of headline inflation because of supply shortages and high cost of logistics and distribution.
“While this cannot be directly influenced using monetary policy tools, the bank’s response to the drivers of headline inflation is targeted at addressing identified monetary drivers such as money supply growth, exchange rate depreciation and Currency-Outside-Banks.”
Further analysis of the report revealed that currency held outside banks also surged. For instance, in January 2023, N792.18 billion was reported outside the banking system, which increased to N3.28 trillion by January 2024.
February saw an increase from N843.31 billion in 2023 to N3.41 trillion in 2024. By March, the amount had grown from N1.45 trillion in 2023 to a staggering N3.63 trillion in 2024, showing an increase of 150 per cent.
According to the report, there was high volume withdrawals from the apex bank branches by Deposit Money Banks (DMBs) and panic withdrawals by customers from the ATMs in 2023. Air Peace Bags ICAN Achievement Award
