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.

He made the remark an exclusive interview with Techeconomy correspondent, against the background of the new 26.25 percent interest rate set by Nigeria’s apex bank.

According to Aremu of the Peculiar Innovative Consulting,

“For the demand side of the capital, those who are into manufacturing, those who want to lend money to do business, there will be an increase cost on the source of their fund, hence some of them may be discouraged to get money from the market to industrialized or even do bigger businesses as it were. Because the interest cost will be quite killing for them and it will also discourage business from also scaling up”

The real economy concerns the production, purchase and flow of goods and services (like oil, bread and labour) within an economy.

It is contrasted with the financial economy, which concerns the aspects of the economy that deal purely in transactions of money and other financial assets, which represent ownership or claims to ownership of real sector goods and services.

Speaking further, he noted that ‘’if the government can see what they can do  to subside or give incentives to all those who are into real development like; Agriculture, Manufacturing,  and industrialization,  it  will   enhance employment, and  facilitate Economic development.

Aremu also suggested that the government should give ‘’ incentive, especially on  the rate so that when they are borrowing  money, the money is borrowed at a cheaper cost lower than the MPC rate, this will serve as cushioning effect.’

Recall that the Central Bank of Nigeria (CBN), Tuesday this week raised its benchmark interest rate by 150 basis points to 26.25 percent, the third straight hike this year, to control the rising prices of goods and services and to ensure stability of the naira.

After the two-day Monetary Policy Committee (MPC) meeting in Abuja, the members agreed to hold other parameters unchanged. Consequently, the CBN retained the asymmetric corridor around the MPR at +100/-300 basis points, cash reserve ratio (CRR) at 35 percent, and retained the liquidity ratio (LR) at 30 percent.

The analyst noted that, “the increase in the interest rate by the Central Bank of Nigeria (CBN, has two sides effects, number one, it have an effects on the supply side of the capital which is the investor

“For the investors is a positive one, for those who are  investing in treasury bills and  instrument that are safe in the financial market, they would expect that interest rate will begin to go up and that they should have more returns on their investment. ”

“But again, we are still not yet beating inflation, the inflation with our rate of returns on Nigeria financial market.  As we speak everybody fund is still at negative real return.

“Any reform that is not covering inflation  presupposes a negative return, Inflation is still on the high side and they are having the interest rate increased to 26.25% that is telling you that we still have about nearly minus 8 or thereabouts that is still hanging.”

‘’Anyway, it seems better than nothing, and for those investing in the Treasury bill financially safe instrument is a good one. They should expect the rate to go up and get more returns for their investment, thus that is a good one that for the supply capital,” he said.