3 months ago
7
- According to data from the CBN, there will be a notable shift in the amount of currency in circulation as of June 2024
- There was a notable 56% increase from N2.6 trillion in the same month last year to an unprecedented N4.05 trillion
- The currency in circulation includes cash from bank vaults as well as money held outside the banking system
Legit.ng journalist Zainab Iwayemi has over 3 years of experience covering the Economy, Technology, and Capital Market.
The Central Bank of Nigeria (CBN) data has highlighted a significant turning point in the amount of currency in circulation (CIC) as of June 2024.
Source: Getty Images
The data shows an unprecedented N4.05 trillion, a sharp rise of 56% from N2.6 trillion in the same month the year before. This figure represents the highest level of CIC ever recorded in Nigeria.
Both currency kept outside of the banking system and bank vault cash are included in the CIC. This increase is noteworthy because it signifies a 2% monthly growth from May 2024, when the CIC was N3.65 trillion.
PAY ATTENTION: Share your outstanding story with our editors! Please reach us through info@corp.legit.ng!
According to the data, a whopping 94% of the CIC, or N3.79 trillion, is currently stored outside of the banking industry. The quantity of cash held outside banks has increased by more than four times in the last year, according to this data.
This sharp increase reveals a noteworthy tendency of cash hoarding, which is being fueled by inflationary pressures, public mistrust of the banking industry, and a general inclination towards cash transactions.
Although a rise in CIC may indicate strong consumer spending and economic activity, there are significant hazards associated with it as well. Increased cash availability may make inflationary pressures worse. These mounting worries are reflected in Nigeria's inflation rate, which increased to 34.19% in June 2024 from 22.79% in the same month the previous year.
There exist several reasons for the elevated incidence of currency hoarding. This trend has been exacerbated by public mistrust of the financial system, concerns about growing inflation, and a preference for actual cash in day-to-day transactions. With a substantial increase in inflation, the rate in June 2024 is 11.40 percentage points greater than it was in June 2023.
The headline inflation rate increased little from 2.14% in May 2024 to 2.31% in June 2024 on a month-to-month basis. Unchecked money supply growth has the potential to increase inflationary pressures.
Coronation Research analysts warn that this expansion of the money supply could reduce purchasing power and raise living expenses, especially for lower-class households, if it is not offset by an equal growth in production.
The state of the economy today emphasises the necessity of prudent monetary policy in order to prevent the negative consequences of growing inflation and maintain economic stability.
Naira settles at lowest in 4 months
Legit.ng reported that the naira has plummeted to a four-month low, despite efforts by the central bank to support it, such as raising interest rates for a record 12 meetings this week.
The naira is down 43% this year, making it the second-worst-performing currency tracked by Bloomberg globally after the Lebanese pound. It has lost around 70% of its value since President Bola Tinubu relaxed currency restrictions to attract foreign investment, alongside partially lifting fuel subsidies.
Due to the actions, inflation has accelerated to almost a three-decade high, forcing the central bank to increase borrowing prices by a total of 15.25 percentage points since the beginning of 2022.
Source: Legit.ng
English (US) ·