In a significant financial development, the Central Bank of Nigeria (CBN) reported that the amount of currency in circulation reached an unprecedented ₦3.97 trillion at the end of May. This figure represents a 1.07% increase from the previous month and marks an all-time high.
The CBN’s data, published on its website on Sunday, shows a consistent rise in currency circulation over recent months. In April, the total was ₦3.92 trillion, while March saw ₦3.86 trillion. This upward trend has persisted despite the CBN’s monetary policy tightening, which includes maintaining a benchmark interest rate of 26.65%.
Currency in circulation encompasses all banknotes and coins that have been issued for public use in the economy. The CBN reported a 4.76% month-on-month increase in circulation from February to March 2024, moving from ₦3.69 trillion to ₦3.87 trillion.
Additionally, the volume of currency outside of the banking system has shown a steady rise throughout the first quarter of the year. It grew from ₦3.28 trillion in January to ₦3.41 trillion in February, and then to ₦3.63 trillion in March. Remarkably, over 90% of the total currency in circulation is held outside of banks, indicating a preference among Nigerians for holding cash.
Muhammad Abdullahi, a member of the CBN’s Monetary Policy Committee, highlighted in the March meeting that the substantial amount of currency outside banks is a key factor contributing to the country’s inflation. This insight underscores the complex relationship between cash circulation and broader economic conditions in Nigeria.
As currency circulation continues to rise, the CBN’s efforts to manage inflation and stabilize the economy remain critical. The trends observed in these figures reflect broader economic behaviors and challenges, emphasizing the need for effective monetary policies to address the increasing preference for cash holdings among Nigerians.