In three months, from September 2023 to December 2023, the Central Bank of Nigeria (CBN) reports a substantial surge in currency in circulation (CIC), witnessing an impressive uptick of about N890 billion.
December 2023 witnessed a noteworthy climb, with the CIC reaching N3.65 trillion compared to the N2.76 trillion noted in September 2023, marking Cardoso’s tenure initiation as the CBN governor.
Despite the CBN’s reassurance of sufficient cash, a 32% increase or N890 billion occurred when Nigerians grappled with naira scarcity.
Startlingly, CBN data highlights that a significant 94% of the CIC remains outside the banking system as of December 2023, amounting to N3.43 trillion. This reflects a substantial 42% surge from N2.42 trillion in September 2023.
This surge in non-bank-held cash raises concerns about the adequacy of currency within the banking system. Responding to public anxiety, the CBN issued a statement in November 2023, attributing the cash scarcity to hoarding and advising against panic withdrawals.
Amid reports of cash scarcity at various financial points, including banks, ATMs, Points of Sale, and Bureaux de Change (BDCs), Nigerian banks faced operational challenges, struggling to meet customer withdrawal demands.
Insights from the Monetary Policy Committee (MPC)
During an October 2022 MPC meeting, former CBN Governor Godwin Emefiele identified inflationary pressure fueled by the prevalence of N1,000 and N500 bills in circulation. Emefiele, removed from his position since, highlighted widespread hoarding, with over 80% of currency stored outside commercial banks.
Emefiele’s proposal to redesign N200, N500, and N1,000 notes and introduce new notes significantly reduced currency supply. However, the CBN now allows more cash to circulate under new leadership.
Furthermore, the CBN extended the deadline for the legal tender status of old N200, N500, and N1000 notes beyond December 31, 2023, signalling a potential resolution to the cash scarcity crisis.
However, concerns linger that the surge in circulating currency may undermine CBN’s efforts to curb soaring inflation, reaching 28.92% in December 2023. The behavioural pattern of hoarding cash among Nigerians remains a potential contributor to the palpable cash scarcity in the country.
