Currency in circulation falls by N65.74bn in four months
The currency in circulation fell by N65.74bn to N2.741tn at the end of June from N2.81tn in March, the latest figures from the Central Bank of Nigeria showed on Wednesday.
According to the CBN, the currency in circulation, which stood at N2.796tn at the end of April, fell to N2.791tn in May.
The CBN defined the currency in circulation 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/withdrawals & 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.
According to the CBN, 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 represented the country’s currency in circulation.
On the performance of monetary aggregates, the CBN said broad money supply grew by 1.15 per cent in April 2021, compared with 0.04 per cent in March 2021.
This development was largely driven by growth in net domestic assets, while net foreign assets contracted.
The growth in net domestic assets reflected the growth in aggregate credit supported by the ongoing broad-based monetary and fiscal stimulus, the CBN said.
It said gross banking sector credit at the end of March 2021 stood at N23.53tn, compared to N22.68tn at the end of December 2020.
The bank said this represented an increase of N0.85tn (year-to-date), of which commercial and merchant banks disbursed (N0.66tn), microfinance banks (N0.13tn), development finance institutions (N0.05tn), and primary mortgage banks and finance companies (N0.01tn).
It said the liquidity condition in the banking system in the review period was determined by several factors, including fiscal disbursements and withdrawals by states and local governments, periodic CRR debits, foreign exchange interventions, open market operations, and maturing CBN bills, the net effect of which imposed liquidity constraints on the banking system.