CBN: Why currency in circulation dropped by N0.25trn in one month

.Links development to rise in deposits banks, FG, others

.Nigerians still finding it difficult to embrace apex bank’s cashless policy-Currency Analyst

The nation’s currency in circulation has dropped by N0.25 trillion, when compared to N1.9 trillion recorded in January 2018 against N2.15 trillion declared in December 2017, the Central Bank of Nigeria (CBN) has disclosed.

The CBN, in its economic report for fourth quarter, disclosed that, “at N2.15 trn, currency-in-circulation rose by 21.1 per cent, above the level in the third quarter of 2017. The development reflected the growth in currency outside banks”.

According to the new report, “Total deposits at the CBN amounted to N13.17 trn, indicating 7.5 per cent increase over the level at the end of the third quarter of 2017.

The development was as a result of the rise in the deposits of banks, Federal Government and the “others” in the review quarter.

“Of the total deposits at the CBN, the shares of the Federal Government, Banks and ‟Others” were N6,018.10 bn (45.7 per cent), N4,320.37bn (32.8 per cent) and N2,834.02 bn (21.5 per cent), respectively.

“Growth in banks‟ reserves at the CBN and currency-in-circulation accounted for the 16.5 per cent rise in Reserve Money (RM) to N6,477.6 billion at end-December 2017, compared with the level at end-September 2017,” the report stated.

Currency in circulation between November and December 2017 was at N1.79 trn and N1.89 trn respectively, the CBN revealed on its website

The apex bank disclosed that the currency in circulation, which is the physical money used for transactions between consumers and businesses, opened this year at N1.99 trn and closed in February at N1.97 trn.

Commenting on increasing currency in circulation, currency analysts at the Ecobank Nigeria, Mr. Kunle Ezun, hinted that excess liquidity in the economy was due to the Yuletide celebration that has leveraged growth in currency in circulation, stressing that Nigerians are finding it difficult to embrace the cashless policy of the CBN.

His word: “The market is liquid and it is due to current season of the year. We have seen a lot of Treasury Bills that have matured which the CBN has not rolled over. Market is awash with liquidity coming from CBN suspension of Open Market Operation (OMO) and slow down in the foreign exchange sales.”

He explained further that Nigeria is still more of a cash economy, facing infrastructure challenges.

“Someone can blame infrastructure deficit to CBN’s good intention of making Nigeria a cashless society. The infrastructure that will make the cashless policy work is missing compared to what we have in Kenya”.

The apex bank in 2002 introduced the cashless policy to eliminate the amount of physical cash (coins and notes) circulating in the economy, and encourage more electronic-based transactions (payments for goods, services, transfers, among others.)

The CBN said N1.98trn and N1.97 trn was in circulation in March and April respectively, but dropped to N1.89 trillion in May as CBN’s mopped up of liquidity in the system.

Further investigation by The Daily Times revealed that currency in circulation moved to N1.87 trn in June and N1.77 trn in July and increased by 5.6 per cent to N1.86 trn in August.

The amount of Naira in circulation, according to the CBN in September 2017, dropped to N1.78 trn and closed October at N1.79trn.