The currency in circulation dropped by N25.03bn from N2.39tn as of the end of July to N2.36tn as of the end of August, latest figures from the Central Bank of Nigeria revealed on Thursday.
The figure, which stood at N2.35tn as of the end of May, rose to N2.29tn as of the end of June.
The currency-in-circulation on quarter-on-quarter basis fell by 6.0 per cent to N2.29tn at the end of March 2020, compared with a decline of 7.5 per cent at the end of the first quarter of 2019.
According to the CBN’s monthly economic report for May, extensive cash reserve ratio debits on banks that failed to comply with policy directives increased the monetary authority’s liabilities to other depository corporations and increased reserve money in May 2020.
Reserve money grew by 5.9 per cent to N12.96tn compared with a growth of 20.7 per cent in April 2020.
It said that at N10.61tn, liabilities to other depository corporations surged 70.5 per cent above the preceding month’s growth rate of 59.7 per cent.
The report said, “The heightened uncertain outlook due to the lockdown, encouraged more cash to be held by the public.
“This was evident from the increase in currency in circulation, compared with the level in the preceding month.
“Currency in circulation rose by 2.0 per cent to N2.35tn at end-May 2020, compared with the increase of 0.5 per cent at end-April 2020.”
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, according to the apex bank.
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.
It said for every withdrawal made by a DMB at one of CBN’s branches, an increase in the CIC was recorded, adding that for every deposit made by a DMB at one of CBN’s branches, a decrease in the CIC was 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 naira outside the commercial banking system was held by the general public who hoard a lot of the new banknotes.
