- Grows 95.6% to N2.02trn in 10 years
By Omobayo Azeez
Total currency in circulation (CIC) in Nigeria has declined by 3.9 per cent in the last 10 months, while in the last 10 years; it has almost doubled, growing by 95.6 per cent.
Analysis of separate documents obtained from the Central Bank of Nigeria (CBN) and analysed by Business A.M. revealed this.
CBN’s update on currency operations showed that CIC declined by 3.9 per cent to N2.05 trillion in October, from N2.14 trillion in January 2019.
Industry pundits have ascribed this development largely to the tremendous traction gain in the usage of electronic channels for payment settlement within the periods.
For instance, electronic payment transaction value in the Nigerian economy within the first half of 2019 alone is estimated at N284trn carried out in 3.81 billion various transactions on various e-payment channels such as Point of Sales (PoS), internet banking, NEFT, among others.
The Nigerian economy has remained cash-driven for a long time but the introduction of cashless policy and new innovations in the electronic payment segment of the financial sector has resulted in a gradual replacement of dealing with physical cash with e-payment channels.
Despite the traction in e-payment records, physical cash in circulation still remains critical to the Nigerian economy and as experts have observed, the rise or fall in the CIC can be attributed to many factors.
In Nigeria, currency is issued to deposit money banks (DMBs) through the branches of the CBN and unfit notes retrieved through the same channel.
Currency deposited in the CBN by the deposit money banks (DMBs) are processed and sorted into fit and unfit notes in line with the Clean Notes Policy.
According to CBN’s quarterly economic reports, the CIC which stood at N1.032 trillions as at the Q3, 2009 has soared to N2.019 trillion at the end of Q3, 2019, growing by 95.64 per cent.
Also, the CBN states it its 2018 currency operations annual reports that CIC grew by o.8 per cent to N2.33 trillion at the end of 2018. Analysts observed that the growth in CIC at the time reflected the high dominance of cash in the economy and increase in economic activities.
A breakdown of the 2018 end’s CIC indicated that, in terms of volume and value, the proportion of higher denomination bank notes (N100, N200 N500 and N1000) rose from 41.9 per cent to 44.3 per cent 96.9 percent to 97.6 per cent respectively.
As expected, the lower currency continued to dominate in terms of volume, constituting 55.7 per cent of the total. In terms of value however, it constituted a meagre 2.4 per cent of the total bank notes in the country.
According to the CBN record, the ratio of CIC to nominal GDP, which measures the moneyness of the economy, fell slightly by 0.1 percentage point to 1.8 per cent in 2018.
The decline of in the CIC/GDP ratio reflected increased usage of e-payment products such as electronic payment products.
The apex bank’s annual reports also revealed that CIC increased by 0.80 per cent to N2.49 trillion, compared with N2.16 trillion in 2017.
The increase in CIC was due to the 2019 election and the increase in economic activities. On currency disposal, as at the end of December 2018, a total of 1.8 billion pieces or 181,054 boxes valued at N915 billion were disposed, compared with 2.58 billion or 257,501 boxes valued at N977.23 billion disposed in 2017.
The boxes of unfit notes disposed in 2018 decreased by 76,447 boxes, while the value decreased by N62.16 billion or 6.36 per cent.
Frontpage September 14, 2020