The currency in circulation in Nigeria rose to N3.97 trillion by the end of May, this surge marks an all-time high for the nation and represents 1.07 percent increase compared to the previous month.
Data released by the Central Bank of Nigeria (CBN) and reported on their official website over the weekend revealed the consistent upward trajectory of currency in circulation over recent months.
The figures showcase a steady climb to N3.92 trillion in April from N3.86 trillion in March, reflecting a robust trend of monetary expansion.
The surge in currency in circulation persists despite the backdrop of the CBN’s monetary policy tightening efforts, which have seen the benchmark interest rate set at 26.65 percent.
This unexpected growth suggests underlying dynamics influencing consumer behavior and economic activities.
Currency in circulation encompasses banknotes and coins produced and issued for use in the economy.
The rise in this metric underscores the heightened liquidity in the financial system and the increased cash flow within the economy.
Remarkably, the CBN’s data reveals that over 90 percent of the currency in circulation is held outside the banking system.
This revelation indicates a prevalent trend of cash hoarding among Nigerians, underscoring a preference for liquidity and tangible assets amid economic uncertainties.
During the Monetary Policy Committee meeting in March, one of its members, Muhammad Abdullahi, highlighted the apex bank’s concern regarding the high currency holdings outside the banking system.
The surge in currency circulation could potentially fuel inflationary pressures, prompting policymakers to closely monitor the situation.
The progressive increase in currency outside banks during the first quarter further accentuates the rising trend, with figures growing from N3.28 trillion in January to N3.41 trillion and N3.63 trillion in February and March, respectively.
While the surge in currency circulation reflects increased economic activity and liquidity, it also poses challenges for monetary policy management.
The CBN may need to employ targeted measures to regulate currency flows and mitigate inflationary risks associated with excessive liquidity.
As Nigeria navigates its economic landscape, the surge in currency in circulation serves as a barometer of monetary dynamics and consumer behavior.
Policymakers face the task of balancing liquidity management with inflationary pressures to ensure sustainable economic growth and stability.
