Again, Currency Outside Banks, (CoB), fell month-on month (MoM) by N27.5 billion or 0.55 percent to N3.6 trillion in April from N3.627 trillion in March 2024.

However, currency-in circulation (CIC) increased MoM by 1.5 percent to N3.92trillion in April from N3.86trillion in March.

The decline in (CoB) may be indicative of controversy around availability of cash in the banks with bank customers’ lamenting of limited cash withdrawals in banks and Automated Teller Machines, ATMs.

Shielding light on this, Segun Aremu, a Financial Expert said, “the currency outside the bank that fell month on month by the details presented , actually means  that over time there have been growth in the  financial inclusion and the informal sector of the economy has now begin to participate in banking  financial processes.

“Hence, the money people keep in their stores and houses, boxes at home, they are now bringing them to the bank. This also may have been facilitated by the CBN’s regulations.

According to him, “currency in circulation, presupposes that there have been more spending in the economy especially by the government because of the hardship in the land.

“So, the government has to spend a lot. And when there is much more money in circulation and the government is spending so as to probably boost the people’s  income,  the resultant effect is inflation and that is why in every Economic Policy there is something called trade-offs, you cannot have much more  in the circulation and at the same time have low inflation.

Aremu of the Peculiar innovative Consulting,  said,

“When you have more money in circulation, it means that there has been increase in government spending, and that means that there will be inflation which means that cost of goods will go higher, as much money will keep chasing fewer goods  and services.

According to him, the consequent effect is that, it will reduce people purchasing power and their earning power will also reduce. “Because inflation reduces people earning power and that is where are at the moment in Nigeria”, he explained.

The Government keeps spending and this spending does not address inflation. This situation also leads to others such as: capital flight and a situation where people see dollars as the jackpot to buy.

According to the money and credit statistics on the website of the CBN, as at the end of March, the naira in circulation was N3.87tn, higher than N3.69tn in February and N3.65tn in January.

However, currencies outside banks have also increased progressively during the first quarter, growing from N3.28tn in January to N3.41tn and N3.63tn in February and March, respectively.

The data revealed that over 90 per cent of currency in circulation is held outside of the banking system, indicating Nigerians are holding more cash.

In their personal statements, Muhammad Abdullahi, a member of the Monetary Policy Committee of the CBN at their March meeting, posited that the apex bank had identified high currency outside banks as one of the monetary drivers of the country’s inflation.

He said, “From available data, prices of domestic food items remain the major driver of headline inflation because of supply shortages and high cost of logistics and distribution.

“While this cannot be directly influenced using monetary policy tools, 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, the combined impact of which will dampen inflationary pressure significantly.”

In January 2024, at the height of the currency redesign policy, currency in circulation stood at N1.386tn with the percentage of the cash outside the banks standing at 57 per cent at N792.184bn.

By February, the cash outside banks rose to N843.311bn, representing 85.9 per cent of the N982.097bn that was in circulation.

It dropped further in March to 85.8 per cent with N1.445tn of the N1.683tn CIC, outside the banking system… [Source: Punch]