The latest data from the Central Bank of Nigeria (CBN) shows that the currency in circulation (CIC) reached a year-high of N4.05 trillion in June 2024, up by 56% from N2.6 trillion in the same month of the previous year.
The CIC comprises the currency outside the banking system and the vault cash of banks.
For the first time in Nigeria’s history, the currency in circulation has surpassed N4 trillion, according to data from the CBN.
The month-on-month (MoM) growth rate was 2%, from N3.65 trillion recorded in May 2024.
Nairametrics further observed that 94% of currency in circulation is outside the banking system, as cash outside banks hit a new high of N3.79 trillion. The currency outside banks has more than quadrupled over the past year.
What the data is saying
- In January 2024, Nigeria’s currency in circulation was N3.65 trillion, a 163% increase from N1.39 trillion in January 2023. This represents a staggering year-on-year growth of 163.3%. The currency outside banks followed a similar trend, with an increase of 314% from N792.18 billion in January 2023 to N3.28 trillion in January 2024.
- February 2024 continued the upward trend with currency in circulation climbing by 276% to N3.69 trillion, compared to N982.1 billion in the same month of last year. The currency outside banks also increased substantially, reaching N3.41 trillion from N843.31 billion in the previous year, representing a 304.7% rise.
- March 2024 saw the currency in circulation rise to N3.87 trillion, up from N1.68 trillion in the same month of 2023, indicating a year-on-year growth of 129.8%. The currency outside banks grew to N3.63 trillion from N1.45 trillion in March 2023, a 151.1% increase.
- In April 2024, the currency in circulation further increased to N3.92 trillion, compared to N2.38 trillion in April 2023, a 64.9% year-on-year rise. The currency outside banks also saw an increase, reaching N3.61 trillion from N2.08 trillion the previous year, a 73.4% growth.
- May 2024 continued the trend with the currency in circulation reaching N3.97 trillion, up by 56.9% from N2.53 trillion the previous year. The currency outside banks rose to N3.71 trillion from N2.18 trillion in the same month of 2023, marking a 70.4% growth.
- June 2024 marked a historic milestone as the currency in circulation surpassed ₦4 trillion for the first time, reaching N4.05 trillion. The currency outside banks also saw an increase, reaching new high of N3.79 trillion from N2.26 trillion in the same month of the previous year, representing a 67.5% rise. The data for June highlights the continued expansion in liquidity and the preference for holding cash outside banks.
What you should know
The high percentage of cash hoarding could be attributed to various factors, including public distrust in the banking system, inflation fears, and the preference for liquid cash in daily transactions.
This increase in currency circulation could have both positive and negative impacts on the economy. On the positive side, higher cash circulation might indicate increased economic activities and consumer spending. However, it also raises concerns about inflationary pressures, as more cash in the economy can lead to higher prices for goods and services.
The growth comes in the face of the Monetary Policy Committee’s (MPC) stringent measures aimed at controlling inflation.
The headline inflation rate in June 2024 surged from 33.95% in May 2024 to 34.19% in June, and it was 11.40%-points higher compared to June 2023, rising from 22.79%.
On a month-on-month basis, the headline inflation rate in June 2024 was 2.31%, an increase of 0.17 %-points from May 2024’s rate of 2.14%.
Nigeria, which has been grappling with inflationary pressures, may see a further increase in inflation rates if the growth in money supply is not matched by a corresponding increase in production. This can erode purchasing power and impact the cost of living, particularly for lower-income households.
