Nigeria’s currency in circulation hits 10-month high

The currency in circulation in Africa’s biggest economy rose to the highest in 10 months, a BusinessDay analysis has shown.

According to the data from the Central Bank of Nigeria (CBN), the currency in circulation increased by 8.3 percent to N2.99 trillion in October 2023 from N2.76 trillion in the previous month.

On a year-on-year basis, it declined by 9.1 percent from N3.29 trillion in October 2022.

Currency in circulation can be defined as currency outside the vaults of the central bank — that is, all legal tender currency in the hands of the general public and in the vaults of the deposit money banks.

The CBN said it employed the accounting/statistical & deposits approach to compute the currency in circulation in Nigeria.

It said this approach involved tracking the movements in currency in circulation on a transaction-by-transaction basis.

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According to the apex bank, for every withdrawal made by a Deposit Money Bank at one of CBN’s branches, an increase in Currency in circulation is recorded; and for every deposit made by a DMB at one of CBN’s branches, a decrease in currency in circulation is recorded.

BusinessDay reported in March, that currency in circulation dropped to the lowest level in 14 years and five months on the back of the currency redesign policy of the CBN.

It declined by 29.2 percent to N982.1 billion in February, the lowest since October 2008, from N1.39 trillion in the previous month. It declined by 69.9 percent year-on-year from February 2022.

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It however maintained a steady rise when the policy ended, and cash earlier withdrawn from circulation in order to drive e-payments, was returned back into the economy.

The CBN in 2012 introduced its cashless policy in a bid to turn Africa’s most populous nation into a cashless society. The policy was an important landmark in the 21st century monetary history of Nigeria.

The policy on cash-based transactions (withdrawals) in banks, aimed at reducing the amount of physical cash (coins and notes) circulating in the economy, and encouraging more electronic-based transactions (payments for goods, services, transfers, etc.)