Amid MPC Tightening Stance, Currency in Circulation Hits Historic N3.69tn

Kayode Tokede

Amid the aggressive tightening stance of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), currency in circulation reached historic high of N3.69 trillion February 2024.

This represents an increase of N43.07 billion or 1.18 per cent Month-on-Month (MoM) from N3.65 trillion reported in January 2024, and N443.38 billion or 13.64 per cent Year-on-Year (YoY) from N3.25 trillion reported February 203.

Currency in circulation refers to the amount of cash–in the form of paper notes or coins–within a country that is physically used to conduct transactions between consumers and businesses.

The CBN in its latest money and credit statistics, revealed that currency in circulation closed December 2023 at N3.65 billion from N1.39 trillion reported January 2023.

When the CBN governor, Mr. Olayemi Cardoso resumed office September 2023, currency in circulation sttod at N2.76 trillion and it added N892.01 billion to close last year at N3.65 trillion.

The apex bank in November 2023 had said the old naira notes will remain legal tender beyond December 31, 2023 — and no longer have a deadline.

The money and credit statistics also revealed that currency outside banks as of February 2024 stood at N3.41 trillion, representing a growth of N130.54 billion or 3.98 per cent from N3.28 trillion reported by the CBN in January 2024.

Analysts attribute the spike in currency in circulation to fear factor of cash crunch of 2023, among other factors.

Speaking, the Vice President, Highcap Securities Limited, Mr. David Adnori, stressed that bank customers are still confused over the administration of physical currency in Nigeria.

Commenting, the Chief Operating Officer of InvestData Consulting Limited, Mr. Ambrose Omordion said the spike in currency outside the bank is vastly because of the spill over effect of the cash crunch and that average Nigerians are hoarding the new notes and are not depositing in the banks because of distrust in electronic banking.

He said: “The increase in currency outside the banking system is something that is expected largely because of how the naira redesign policy was implemented. An average Nigerian recall what we suffered and because it was suspended till December, a lot of people are preparing themselves for what would happen in December and most people are hoarding the new notes.”

Also, he noted that because Nigeria recently had an election, there are a lot of funds still circulating in the economy and that confidence in electronic banking has not returned to pre-policy.

While there has been a significant surge in the currency in circulation, the country’s economic growth has been tepid, with Nigeria’s economic growth rate for 2024 projected to be around 2.9per cent and 3.1per cent, having one of the slowest growth rates in West Africa.

Inflation has been a significant concern, with the headline inflation rate jumping 31.70per cent in February 2024 from 29.9 per cent reported January 2024, according to the National Bureau of Statistics (NBS).

At the CBN’s second Monetary Policy Committee (MPC) meeting in 2024, the monetary policy rate (MPR) was increased by 200 basis points, elevating it to a historic high of 24.75per cent to combat inflation and foster economic stability.

This pivotal adjustment signifies a major shift from the previous rate of 18.75per cent, which had been in effect since the MPC’s meeting on July 24th and 25th, 2023.

The announcement, made by CBN Governor, highlights the central bank’s proactive approach towards monetary tightening amidst challenging economic conditions.

This unprecedented move has not only set the MPR at its highest level to date but also reflects the CBN’s determined effort to address the persistent economic pressures.

The decision has garnered praise from the International Monetary Fund (IMF), which commended the MPC’s resolve to tighten monetary policy further by increasing the policy rate to 24.75 per cent.