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Tuesday, July 23, 2024

Currency Outside Banks Reaches Record High of N3.71 Trillion in May 2024

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The amount of money outside Nigerian banks is now N3.71 trillion in May 2024.

This info comes from the Central Bank of Nigeria (CBN).

This new high shows people trust banks less or like using cash more.

What does the data say?

  • In May 2024, the money outside banks went up by N104.89 billion from the previous month, a 3% increase.
  • From January 2024 to May, money outside banks went from N3.28 trillion to N3.71 trillion. It dipped a bit in April but rose again in May.
  • Compared to last year (May 2023), there’s a big jump of N1.53 trillion, a 70% rise from N2.18 trillion.

93.56% of money is outside banks

In May 2024, 93.56% of all the money in Nigeria was kept outside banks. Last year, it was about 86.16% in the same month.

This shows more people prefer holding cash. This cash-hoarding started because in 2023 there was a big cash shortage. The CBN tried to change naira notes to push people to use electronic money instead of cash, but the plan didn’t work well.

In 2023, getting cash was hard. Many people couldn’t get the new naira notes, which caused problems. Because of this, people began to keep their cash at home instead of in banks.

People in 2024 still don’t trust banks. That’s why a huge 93.56% of currency is kept outside banks by May.

According to CBN, in May 2024, the total money in circulation went up by 1.07% from N3.92 trillion in April to N3.97 trillion.

Also, compared to last year (May 2023), it rose by 56.94% from N2.53 trillion.

Why should you care?

More money kept outside banks can mean several things. It shows people like using cash more than online payments, maybe because they don’t trust the banks.

This trend can impact inflation rates and how well the CBN can control money. With more cash out of banks, the central bank has less control over the money supply.

Newslodge reported that Nigeria’s total money supply (M3) hit nearly N100 trillion, reaching N99.24 trillion in May 2024. This is a 2% increase from the previous month and a 78% increase from the same month last year.

This growth happened even as the Monetary Policy Committee (MPC) took strict steps to control inflation.

With more money in the system, people might spend more, leading to higher demand for goods and services. This can boost the economy.

However, too much money can cause inflation. When too much money is chasing the same number of goods and services, prices go up.

Nigeria is already facing high inflation (currently at 33.95%). More money without more goods or services can make inflation worse, making life harder for low-income families.

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