Currency in circulation in the country stooped by N70 billion to N2.83 trillion, in January, from N2.9 trillion as of December 2020, data from the Central Bank of Nigeria has shown.
The apex bank said that currency in circulation rose from N2.5tn as of the end of October to N2.66tn as of the end of November.
The banking regulator stated in its November monthly economic report that currency outside depository corporations, transferrable deposits, and other deposits largely propelled growth in monetary liabilities at the end of the review period.
It stated that securities other than shares plummeted by 28.9 per cent, attributable to the low demand for CBN bills due to relatively low yields.
Narrow money supply (M1) expanded by 9.3 per cent, compared with the 10.3 per cent growth at the end of the second quarter of 2020.
The growth in M1 was due to the eight per cent and 9.5 per cent increases in currency outside depositary corporations and transferable deposits respectively, reflecting demand for transaction balances, amidst macroeconomic uncertainties surrounding the COVID-19 pandemic.
The banking regulator stated that net foreign assets and domestic claims grew by 27.5 per cent and 7.4 per cent respectively and contributed 4.7 percentage points and 7.8 percentage points to the growth in M3, at end-September 2020; compared with 6.9 percentage points and five percentage points at end-June 2020.
According to the CBN, currency in circulation is defined as currency outside the vaults of 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 stated that it employed the “accounting/statistical/withdrawals & deposits approach” to compute the currency in circulation in Nigeria.
This approach involved tracking the movements in currency in circulation on a transaction by transaction basis.
That is, for every withdrawal made by a Deposit Money Bank at one of CBN’s branches, an increase in CIC is recorded, and for every deposit made by a DMB at one of CBN’s branches, a decrease in CIC is recorded.
The transactions are all recorded in the CBN’s CIC account, and the balance on the account at any point in time represents the country’s currency in circulation.
According to the apex bank, analysis of the currency in circulation showed that a large and increasing proportion of the Nigerian currency outside the commercial banking system was held by the general public who hoard a lot of the new banknotes.
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