Nigeria’s currency in circulation rises by 93%

The currency in circulation in Nigeria has witnessed a significant surge, with data from the Central Bank of Nigeria revealing a 93.3 per cent increase to 4.1 trillion naira. Of this amount, about 6.6 per cent is within the banking sector, leaving a substantial 93 per cent outside of the formal financial system. To dissect the implications of this growth, Abdulazeez Kuranga, Regional Economist for West Africa at Standard Bank Group, joined CNBC Africa for an in-depth discussion. Kuranga emphasized that the currency outside the banking system is ordinary cash meant for everyday transactions, with historical data indicating that this trend is not a recent development. He highlighted that it is essential to view these figures in context, considering the longstanding prevalence of cash usage in the economy. Despite the seemingly large nominal value, when analyzed as a percentage of total money supply and GDP, the current level of currency in circulation appears to be in line with historical averages. Kuranga compared Nigeria's cash-to-GDP ratio with neighboring countries like Ghana, South Africa, Kenya, and Rwanda, noting that Nigeria's ratio is relatively low, indicating that there is still room for increased circulation. The economist also touched on the Central Bank's efforts to bolster the banking sector by injecting an additional 1.4 trillion naira, underlining the belief that cash supply is not a significant issue. Moving forward, Kuranga addressed concerns regarding the impact of the surge in currency circulation on the CBN's cashless and financial inclusion initiatives. He asserted that the current levels of cash in circulation do not pose a hindrance to these programs, citing historical data that aligns with the ongoing cashless drive in the country. When questioned about the sustainability of the upward trend in currency circulation and CBN's stance on regulating it, Kuranga indicated that the growth is likely to continue until accessibility issues are addressed. As long as challenges persist in accessing cash, the economist foresees the Central Bank maintaining efforts to channel more cash into the banking system. In conclusion, Abdulazeez Kuranga provided a comprehensive analysis of the factors driving the surge in Nigeria's currency circulation and dispelled concerns about its impact on financial inclusion and cashless initiatives. The discussion shed light on the historical context of cash usage in Nigeria and the need for a balanced approach to managing currency in circulation amidst evolving economic conditions.