Currency- in- circulation (CIC) declined by 7.9 percent to N2.2 billion in January 2020 from N2.4 billion in December 2019, according to data obtained from the Central Bank of Nigeria (CBN).
The decline is as a result of the recent increase in Cash Reserve Ratio (CRR) by 500 basis points to 27.5 percent in January from 22.5 percent since 2016, said Abiodun Keripe of investment research, Afrinvest Securities Limited.
The CBN’S Monetary Policy Committee (MPC) at the end of its first meeting of the year announced the increase in the CRR. Godwin Emefiele, governor of the CBN, who announced the increase, said the MPC was confident that it was fortuitous as it would help address monetary-induced inflation whilst retaining the benefits from the bank’s Loan to Deposit Ratio (LDR) policy, which has been successful in significantly increasing credit to the private sector as well as pushing market interest rates downwards.
Currency is issued to Deposit Money Banks (DMBS) through the branches of the CBN and unfit notes retrieved through the same channel. Currency deposited in the CBN by the DMBS are processed and sorted into fit and unfit notes in line with the Clean Notes Policy.
Banks’ credit to the private sector grew by N2 trillion between May 2019 and December 2019, according to the CBN.
At the end of November 2019, CIC rose by 9.9 percent to N2,203.27 billion, in contrast to the decline of 0.4 percent at end of third quarter 2019, according to the CBN’S economic report for the fourth quarter of 2019.
The development, relative to the level in the preceding quarter, reflected, mainly, the increase in its currency outside banks’ component, and seasonal factors.
Total deposits at the CBN amounted to N14,350.54 billion at end-november 2019, indicating an increase of 3.6 percent above the level at end of third quarter 2019. The rise was attributed to 14.3 percent and 3.1 percent increase in the deposits of the Federal Government and the commercial banks, respectively. Of the total deposits at the CBN, the shares of the Federal Government, banks and private sector deposits were 47.4 percent, 35.9 percent and 16.7 percent, respectively.
Reserve money grew by 5.0 percent to N7,353.36 billion at end November 2019, in contrast to the decrease of 13.5 percent at the end of third quarter of 2019. The development reflected the increase in Federal Government and banks’ deposits with the CBN.
The total stock of currency (issuable and non-issuable) in the vaults of the bank as at the end of December 2018 stood at 1,718.57 million pieces, compared with 1,284.10 million pieces in 2017, indicating an increase of 33.83 percent. As at end-december 2018, the total issuable notes (newly printed notes and Counted Audited Clean notes) stood at 496.61 million pieces, compared with 256.61 million pieces in 2017, indicating an increase of 240 million pieces or 94.0 percent. The increase was attributed to the volume of new notes supplied by NSPM plc, the CBN’S report said.