Currency in Circulation Reached N2.9tn In 2020 – CBN

Currency in circulation rose by N249bn from N2.66tn as of the end of November to N2.91tn in December 2020.

The data was obtained from the Central Bank of Nigeria on Sunday.

The CIC rose from a figure of N2.49tn as of the end of October.

The CBN said as a result of its monetary policy actions, the reserve money grew moderately as of end-September 2020. In its third-quarter economic report, it stated that on a quarterly basis, reserve money grew by 2.5 per cent to N13.57tn at end-September 2020, compared with a growth of 30.4 per cent at end-June 2020.

At N11.14tn, liabilities to other depository corporations grew by 1.9 per cent, compared with the growth of 39.3 per cent at end-June 2020, while the currency component grew by 5.5 per cent, compared with 0.2 per cent at end-June 2020.

The corresponding factors were net foreign assets, which grew by 6.7 per cent as a result of the significant decline in the liabilities to non-residents; net claims on the central government; public financial corporations; and the private sector, which grew by 16.0 per cent, 30.8 per cent and 15.8 per cent, respectively.

Though average banking system liquidity moderated in Q3 2020, it remained above the bank’s benchmark of N313.8bn.

Industry net liquidity position closed at an average of N329.11bn in the third quarter of 2020, compared with the average of N372.77bn in the preceding quarter.

Liquidity in the system was moderated by provisioning and settlement of foreign exchange purchases, auctions of CBN bills, FGN bonds and Nigerian Treasury Bills, as well as Cash Reserve Ratio obligations.

The industry liquidity position was positively impacted by repayments of matured CBN bills, and Nigerian Treasury Bills, as well as fiscal disbursements to the three tiers of Government.

According to the CBN, currency in circulation is defined 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 stated that it employed the “accounting/statistical/withdrawals and deposits approach” to compute the currency in circulation in Nigeria.

This approach involved tracking the movements in currency in circulation on a transaction by transaction basis.

That is, for every withdrawal made by a DMB 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 represents the country’s currency in circulation.

According to the apex bank, analysis of the currency in circulation showed that a large and increasing proportion of the Nigerian currency outside the commercial banking system was held by the general public who hoard a lot of the new banknotes.

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