Currency outside banks surges to N4.02 trillion in September 2024

• Currency outside banks increased to N4.02 trillion in September 2024
• Currency in circulation outside banks increased by 93.1 per cent
• The money supply also increased in September 2024 to N108.96 trillion

Currency outside banks increased by 66.2 per cent year-on-year from N2.42 trillion in September 2023 to N4.02 trillion in September 2024, representing an increase of N1.60 trillion in one year.

According to the Money and Credit Statistics data of the Central Bank of Nigeria (CBN), currency outside banks recorded a 3.8 per cent increase month-on-month from the N3.87 trillion recorded in August 2024, which is an increase of N147.9 billion.

The figure indicates the public’s preference for retaining cash outside formal banking channels. This has implications for the bank’s liquidity and will shape monetary policy dynamics.

With CBN’s monetary tightening stance to halt excess liquidity, increased currency outside the banking system may lead to further tightening through increased interest rates as the Monetary Policy Committee (MPC) is wont to.

Recall that at the 297th MPC meeting of the CBN, the committee decided to increase the Monetary Policy Rate (MPR) for the fifth consecutive time in seven months by 50 basis points (bps) to 27.25 per cent from 26.75 per cent in July.

The decision, according to the CBN governor, Olayemi Cardoso, is to tame the persistent inflationary pressures and consolidate the gains recorded with previous rate hikes. This approach, according to analysts, has implications for the broader economy.

Currency-in-circulation outside banks rises by 93.1 per cent

According to the CBN data, 93.1 per cent of currency-in-circulation (CIC) was outside banks in September 2024, which is an increase from the 87.5 per cent recorded in September 2023.

According to the report, currency in circulation increased by 56.1 per cent year-on-year to N4.31 trillion in September 2024, from the N2.76 trillion recorded in September 2023, representing a N1.55 trillion increase.

On a month-on-month basis, currency in circulation increased by 4.0 per cent in September 2024, a N166.2 billion increase from the N4.14 trillion recorded in August 2024.

The figure shows that the volume of currency retained outside the banking sector was higher than the total released for circulation within the past year.

The trend may be due to such factors as limited trust in banking services, inflationary pressures, or a structural dependence on cash in the informal Nigerian economy.

More money outside banks is an indication of reliance on cash and will hamper efforts towards financial inclusion and achieving a cashless economy.

Money supply also increased in September

Money supply (M3) in Nigeria increased by 62.8 per cent year-on-year in September 2024 from N66.94 trillion in September 2023 to N108.96 trillion.

On a month-on-month basis, the money supply grew by 1.6 per cent from N107.19 trillion in August 2024.

Increased money supply, which typically encompasses both net foreign assets and net domestic assets and gives a holistic view of a nation’s monetary dynamics, is in defiance of the tightening stance of the MPC intended to manage excess liquidity to control inflation.

Currency outside banks dropped to N3.66trn in July, Central Bank of Nigeria says

Meanwhile, TheRadar reported that currency outside of the banking system in Nigeria decreased by 3.32 per cent (or N130 billion) to N3.66 trillion in July, which was compared to N3.79 trillion in June 2024, according to the CBN.

This is contained in Money and Credit data that was available on the CBN’s website on Thursday, August 29.