- Currency outside Nigeria’s banking system dropped to N3.66 trillion in July, according to the Central Bank of Nigeria
- Conversely, currency in circulation increased by 0.12 per cent to N4.05 trillion within the period
- Less currency outside of banks suggests the impact of efforts to curb excess liquidity
The Central Bank of Nigeria (CBN) says 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.
This is contained in Money and Credit data that was available on the CBN’s website on Thursday, August 29.
The decrease marks the second time the currency outside banks dropped in 2024, the first being a 0.62 per cent (or N20 billion) drop from N3.63 trillion in March to N3.61 trillion in April.
The data shows that the amount outside banks dropped by 3.2 per cent, from 93.59 per cent of the currency in circulation recorded in June 2024 to 90.39 per cent (or N3.66 trillion) in July 2024.
Currency in circulation has increased
The CBN data also shows that currency in circulation increased marginally by 0.12 per cent from N4.04 trillion in June to N4.05 trillion in July 2024.
The marginal increase marks sustained efforts to keep the currency in circulation above N4 trillion, first recorded in June 2024, while currency outside banks reached a new N3.79 trillion high in the same month.
The July figures suggest that while currency in circulation has increased, currency outside banks decreased from the figures seen in June.
Currency in circulation since the beginning of the year has risen by 11.05 per cent compared to a 56.17 per cent rise in the same period in 2023.
This has put paid the efforts of the apex bank to mop up excess cash, bring more money into the formal banking system, encourage the adoption of digital transaction and payment methods and deepen financial inclusion.
Less money outside banks suggest efforts toward economic stabilisation
When there are fewer currencies outside the banking system, it is an indication that people are depositing their money with banks rather than holding on to cash, which could also suggest greater reliance and adoption of digital options of settling transactions.
This shift aligns with the CBN’s vision of deepening financial inclusion and digital payment adoption. It also informs the apex bank’s monetary tightening stance to control cash circulation as a means to rein in inflation.
Recall that at its last Monetary Policy Committee (MPC) meeting in July, members decided to increase the Monetary Policy Rate (MPR) by 50 basis points from 26.25 per cent in June to 26.75 per cent.
With more money within the banking system and fewer outside banks, the CBN can better control the system by implementing effective monetary policies that will support economic growth and stability.
It reduces the risks associated with cash-based disruptions and more accurate tracking of activities within the economy.
Money supply in Nigeria reaches all-time high of N101.34trn in June
Meanwhile, TheRadar reported that the money supply in Nigeria exceeded N100 trillion to reach an all-time high of N101.34 trillion in June 2024, according to data from the Central Bank of Nigeria (CBN).
The new figure represents a 56.15 per cent increase from N64.90 trillion recorded in the corresponding period of June 2023 and a month-on-month increase of 2.11 per cent from N99.23 trillion recorded in May 2024.
