The currency in circulation in Nigeria has surged by N1.7 trillion, driven by a surge in cash transactions.
According to data obtained from the Central Bank of Nigeria (CBN), as of the end of August, the currency in circulation rose to N2.7 trillion.
This substantial increase in currency in circulation comes after a 235.03 percent dip to N982.1 billion as of the end of February 2023 from N3.29 trillion at the close of October 2022, primarily due to the naira redesign policy spearheaded by the CBN.
However, the currency in circulation began its steady ascent once the policy concluded. Cash that had been previously withdrawn from circulation to promote electronic payments was reintroduced into the economy, contributing to this significant boost.
The data obtained from the CBN reveals that a whopping N2.3 trillion was removed from circulation during this period.
The CBN defines currency in circulation as all legal tender currency in the hands of the general public and within the vaults of Deposit Money Banks, excluding the central bank’s vaults.
The CBN further elucidated its methodology, stating that it employed an “accounting/statistical/withdrawals & deposits approach” to calculate the currency in circulation in Nigeria. This approach meticulously tracks the movement of currency in circulation on a transaction-by-transaction basis.
Under this methodology, each withdrawal made by a Deposit Money Bank at one of CBN’s branches results in an increase in currency in circulation (CIC), while each deposit made by a DMB at one of CBN’s branches leads to a decrease in CIC.
This surge in currency in circulation reflects the evolving landscape of financial transactions in Nigeria and underscores the importance of flexible monetary policies in facilitating economic growth and stability.