ANALYSTS RAISE CONCERNS ABOUT THE N3.79 TRILLION HELD OUTSIDE NIGERIA'S BANKING SYSTEM
1. Surge in Unbanked Currency:
- Current Data: The amount of currency outside Nigeria's banking system increased to N3.79 trillion in June 2024, up from N3.61 trillion in April.
2. Impact on CBN Policies:
- Policy Implementation: The large volume of unbanked money complicates the Central Bank of Nigeria’s (CBN) ability to implement monetary policies effectively. This affects the CBN’s control over financial metrics and its ability to manage liquidity.
- Challenges: Significant cash held outside the banking system, particularly in rural areas, limits the CBN’s control over the Cash Reserve Ratio and economic activities.
3. Expert Opinions:
- Marcel Okeke (Zenith Bank): The unbanked currency undermines the CBN’s policy goals and makes it difficult to manage excess liquidity. Increased financial inclusion efforts are needed to address this issue.
- Mary Ogundokun (Chartered Accountant): Concerns about potential cash pool inflation due to insufficient cash in banks, which impacts lending and overall economic stability.
4. Financial Data:
- Total Currency in Circulation: Increased to N4.05 trillion in June from N3.92 trillion in April.
- CBN Special Intervention Fund: Decreased by 35.7% from N433.23 billion to N278.86 billion.
- Credit to Private Sector: Declined from N74.3 trillion to N73.12 trillion.
- Money Supply: Increased to N101.35 trillion from N99.24 trillion, with narrow money rising to N36.78 trillion from N33.38 trillion.
- Net Foreign Assets: Increased to N18.33 trillion, while net domestic assets decreased slightly to N83.0 trillion from N83.90 trillion.
5. Future Outlook:
- Financial Inclusion: Broader financial inclusion and improved literacy are essential for addressing the challenges posed by large sums of money held outside the banking system.
- Economic Stability: Continued efforts by the CBN to manage money supply and stabilize the economy will be crucial in overcoming the challenges associated with unbanked currency.
1. Surge in Unbanked Currency:
- Current Data: The amount of currency outside Nigeria's banking system increased to N3.79 trillion in June 2024, up from N3.61 trillion in April.
2. Impact on CBN Policies:
- Policy Implementation: The large volume of unbanked money complicates the Central Bank of Nigeria’s (CBN) ability to implement monetary policies effectively. This affects the CBN’s control over financial metrics and its ability to manage liquidity.
- Challenges: Significant cash held outside the banking system, particularly in rural areas, limits the CBN’s control over the Cash Reserve Ratio and economic activities.
3. Expert Opinions:
- Marcel Okeke (Zenith Bank): The unbanked currency undermines the CBN’s policy goals and makes it difficult to manage excess liquidity. Increased financial inclusion efforts are needed to address this issue.
- Mary Ogundokun (Chartered Accountant): Concerns about potential cash pool inflation due to insufficient cash in banks, which impacts lending and overall economic stability.
4. Financial Data:
- Total Currency in Circulation: Increased to N4.05 trillion in June from N3.92 trillion in April.
- CBN Special Intervention Fund: Decreased by 35.7% from N433.23 billion to N278.86 billion.
- Credit to Private Sector: Declined from N74.3 trillion to N73.12 trillion.
- Money Supply: Increased to N101.35 trillion from N99.24 trillion, with narrow money rising to N36.78 trillion from N33.38 trillion.
- Net Foreign Assets: Increased to N18.33 trillion, while net domestic assets decreased slightly to N83.0 trillion from N83.90 trillion.
5. Future Outlook:
- Financial Inclusion: Broader financial inclusion and improved literacy are essential for addressing the challenges posed by large sums of money held outside the banking system.
- Economic Stability: Continued efforts by the CBN to manage money supply and stabilize the economy will be crucial in overcoming the challenges associated with unbanked currency.