Emmanuel OchayiNigeria’s currency in circulation has surged to N3.87tn as of March’s end, indicating a preference for cash among Nigerians. The Central Bank of Nigeria (CBN) disclosed this in its latest money and credit statistics.
The data underscores a consistent increase in currency outside banks during the first quarter, climbing from N3.28tn in January to N3.63tn by March. Over 90% of this currency is held outside the banking system, showcasing a significant reliance on cash.
Muhammad Abdullahi, a member of the CBN’s Monetary Policy Committee, highlighted the impact of high currency outside banks on inflation, stating, “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.”
During the currency redesign policy in January 2024, currency in circulation stood at N1.386tn, with 57% of the cash outside the banks. By March, the amount outside banks soared to N1.445tn, representing 85.8% of the total circulation.
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Abdullahi’s statement sheds light on the CBN’s strategy to mitigate inflationary pressures. While unable to directly influence food prices, the bank aims to tackle monetary drivers like currency outside banks, which contribute to inflation.
The steady rise in currency outside banks indicates a preference for tangible cash over digital transactions, despite efforts to promote cashless policies. This reliance on physical currency poses challenges for monetary policy effectiveness and financial inclusion initiatives.
Experts suggest that addressing the factors driving cash preference, such as limited access to banking services and distrust in digital transactions, is crucial for promoting a more balanced financial ecosystem.
As Nigeria navigates economic challenges, understanding the dynamics of currency circulation is vital for formulating effective monetary policies that promote stability and inclusive growth.
