Nigeria’s currency in circulation exceeded N4 trillion in June 2024, marking a historic milestone. This significant increase reflects various economic dynamics, including the central bank’s policies and the country’s economic conditions.
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Surge in Currency Circulation
The Central Bank of Nigeria (CBN) reported that the currency in circulation rose to N4.04 trillion by the end of June 2024. This is the first time in the nation’s history that the currency in circulation has surpassed the N4 trillion mark. The increase is attributed to several factors, including the rising demand for cash, inflationary pressures, and economic activities in the informal sector.
Factors Driving the Increase
- High Inflation Rates: Nigeria has been grappling with high inflation rates, particularly in the food sector. Food inflation has been a significant driver, with prices of staple foods rising sharply due to factors such as high foreign exchange rates, insecurity in farming regions, and increased transportation costs【13†source】.
- Depreciation of the Naira: The naira has depreciated significantly against the dollar, contributing to higher costs for imported goods. This depreciation has led to an increase in the nominal amount of currency needed for transactions.
- Economic Activities: The informal sector, which heavily relies on cash transactions, has also contributed to the rise in currency circulation. Many Nigerians still prefer cash for daily transactions, despite efforts to promote digital payments.
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Implications for the Economy
The surge in currency circulation has several implications for Nigeria’s economy:
- Inflationary Pressures: An increase in currency circulation can lead to higher inflation if not matched by corresponding economic growth. The CBN has been adopting tight monetary policies to curb inflation, but the high volume of cash in circulation poses challenges.
- Policy Responses: The government and the CBN might need to introduce measures to manage the increased cash flow and ensure it does not further exacerbate inflation. These measures could include promoting digital payment systems and enhancing the security of farming communities to boost food production.
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Conclusion
The record-high currency in circulation in Nigeria highlights the complex interplay of economic factors affecting the country. As the CBN and the government continue to address these challenges, the focus remains on achieving economic stability and controlling inflation.
For more detailed information, you can read the full report on Nairametrics here.