The Central Bank of Nigeria’s (CBN) latest money and credit statistics indicate a notable upswing in the amount of Currency in circulation (CIC), showing an increase of approximately N890 billion between September 2023 and December 2023. This surge, observed during Governor Cardoso’s tenure, highlights a significant climb from N2.76 trillion in September to N3.65 trillion in December 2023, representing a 32% rise.

Despite the CBN’s reassurance of sufficient Cash, Nigerians faced a naira scarcity challenge during this period. This spike in CIC raises questions about the dynamics influencing the country’s monetary landscape.

Nigerians Hold 94% of Circulating Cash at Home

Data from the CBN reveals that a substantial 94% of the currency in circulation is outside the banking system as of December 2023. The non-bank-held cash experienced a 42% increase, reaching N3.43 trillion in December, up from N2.42 trillion in September 2023. This surge in non-bank-held cash adds to the growing public concern regarding the adequacy of currency in the banking system.

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This trend also follows widespread reports of cash scarcity at various financial touchpoints across major Nigerian cities, including banks, ATMs, Points of Sale, and Bureaux de Change (BDCs). The strain on Nigerian banks to meet customer withdrawal demands has resulted in operational challenges.

CBN’s Response and Currency Management Challenges

Responding to concerns, the CBN issued a statement in November 2023, attributing the cash scarcity to hoarding and reassuring citizens of adequate currency stock. The central bank acknowledged the challenges in managing cash and blamed the prevalence of hoarding for the increased inflationary pressure.

The backdrop to this scenario includes the former CBN Governor Godwin Emefiele’s statement during a Monetary Policy Committee (MPC) meeting in October 2022. He highlighted difficulties in managing cash, citing widespread hoarding of banknotes, with over 80% stored outside commercial banks’ vaults. Emefiele, who has since been replaced, initiated a currency redesign policy, resulting in a significant reduction in currency supply.

Current Developments and Outlook

With the change in leadership at the CBN, there seems to be a shift towards allowing more cash circulation. The central bank also removed the deadline for the legal tender status of old N200, N500, and N1000 notes, signaling a potential resolution to the cash scarcity crisis. Nairametrics reported a new year high of N3.4 trillion in CIC as of December 11, 2023, suggesting a continual increase in circulating currency.

However, concerns persist that the rise in currency circulation and money supply may counteract the CBN’s efforts to curb surging inflation, which reached 28.92% in December 2023. Monitoring these trends will be crucial for understanding the evolving dynamics of Nigeria’s monetary landscape.

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