CBN injects N701b into circulation to breathe life back into economy
By Jeph Ajobaju, Chief Copy Editor
Currency in circulation leapt to N1.68 trillion in March, a 71.4 per cent month-on-month (MoM) rise on N982.1 billion in February, as the Central Bank of Nigeria (CBN) injected N701.4 billion back into circulation to end the cash crunch that lasted three months and hobbled the economy.
CBN figures show currency in circulation reversed its downward trend, which had dipped to a 14-year low of N982.1 billion in February.
The surge in cash supply is on the back of a Supreme Court ruling ordering the CBN to retain old banknotes in circulation until December 31, sequel to a suit filed by some Governors against the implementation of the naira redesign policy.
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CBN contractionary measures
Currency outside the banking system increased to N1.44 trillion in March from N843.3 billion in February, an increase of N602.1 billion or 71.4 per cent, according to reporting by Nairametrics.
About 86 per cent of the currency in circulation was outside the banking system, about the same amount in October 2022 when the CBN announced the naira redesign policy.
The rise in circulating currency is despite the contractionary measures of the CBN in line with the direction of other central banks of the world. The CBN has consistently raised the monetary policy rate (MPR) in the past 10 months.
Between May 2022 and March 2023, the benchmark interest rate has been increased by 650 basis points from 11.5 per cent to 18 per cent yearly, to tame inflation.
The CBN adopted a twin approach of interest rate hikes and naira redesign to mop excess liquidity from the economy, while encouraging cashless transactions.
However, the policy was poorly implemented as naira scarcity led to high cost of goods and services.
The inability of the banking system to onboard the massive influx of mobile users triggered a massive cash scarcity as well as unsuccessful online transactions, exacerbated by reports of account hacks and fake alerts.
Money supply rose to N54.6 trillion in March 2023 from N53.3 trillion in February, the highest MoM level on record.
The increase affected the two components of money supply (M3), Net Foreign Assets (NFA) and Net Domestic Assets (NDA).
NFA rose from N5.5 trillion in February 2023 to N5.99 trillion in March. NDA, which was N47.8 trillion in February, shot up to N48.64 trillion in March.
Credit to the private sector increased to N43.1 trillion from N41.8 trillion but credit to the government dropped from N28.43 trillion to N27.5 trillion