According toÂdata from the Central Bank of Nigeria (CBN) on money and credit,money in circulation increased by 56.13% year-on-year, reaching N4.31 trillion in September 2024, up from N2.76 trillion in September 2023. This surge reflects a 4.04% rise in cash circulating in the economy, rising from N4.14 trillion in August 2024. This trend highlights Nigeria’s heavy reliance on cash transactions,with cash held outside banks growing faster than money issued for circulation. Also, Nigeria’s money supply (M3) increased substantially to N66.95 trillion in September 2024, up 62.8% from N41.94 trillion in the previous year and showing a 1.6% rise from N65.19 trillion in August 2024.
However, the increase in currency circulation and overall money supply suggests pressures that may exceed Nigeria’s productive capacity, contributing to Increase in inflation. Approximately 93.1% of Nigeria’s currency in circulation was being held outside banks in September 2024, compared to 87.5% the previous year. The shift may be attributed to factors such as low trust in banking services, inflationary pressures, and the cash-dependent nature of Nigeria’s informal economy.
The rising currency circulation and expanding money supply present complex challenges for the economy, highlighting the need for targeted policy interventions. The Cashless Policy by the CBN aims to reduce reliance on cash transactions, potentially easing inflation by controlling currency circulation and money supply. Therefore, addressing challenges like network glitches and insufficient ATMs to ensure that effective electronic payment systems are available to implement this policy for conciseness and clarity.
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