Currency in circulation in the country fell by N75.84Bn from N1.9Tn in June to N1.824Tn in July 2018. According to statistics from the Central Bank of Nigeria on Wednesday, the figure rose from N1.93Tn in February to N2.03Tn in March. The CBN revealed that the currency in circulation fell to N1.95Tn and N1.93Tn in April and May, respectively.
Commenting on factors that could affect currency in circulation, the Chief Executive Officer, Economic Associates, Dr Ayo Teriba, said one reason was the growth of electronic payment, such as increase in the use of Automated Teller Machines, Point of Sale and domestic fund transfer rather than using cash.
“The e-money is displacing the Naira on the retail fund as a means of payment, as a store of value, foreign currency is replacing the Naira. So that trend may continue until you have a negligible amount of Naira in circulation,” he said. He said people no longer needed to stock up cash to pay for things, because they could go to the supermarket, restaurant or any shop and pay with their bank card.
Teriba said, “Instead of giving people cash, you can transfer, so many of the things that you needed to use cash for in the past you don’t need currency for them now. Electronic money is displacing cash at the retail end.” Another reason he gave is the weakness of the currency structure, with the country having its highest denomination as N1000, a value that is less than three dollars. He explained that this means that the Naira had been reduced from a strong means of payment that also possess store of value.
“It is a large denomination note that we keep as store of value, so the Naira currency is not a note that you will say you want to keep as a store of value. If you want a currency for value, you better move for foreign currency. If you wanted money to keep at home for safety, you better keep your $50 or $100, or £20 and £50. So, Naira as a store of wealth is weakened by not having large denomination notes.”
According to him, if a person holds the Naira now, he probably wants to use it for retail spending. He said that the Naira now has competitors at the retail end such as the ATM and PoS. “With funds transfer, You can transfer as little as N1,000. You do not even need cash to buy recharge card because you can recharge on your phone or at the ATM,” he said.