According to the most recent information provided by the Central Bank of Nigeria (CBN), the amount of money in circulation in the West African country dipped in July 2023.
As indicated by the statistics, the amount of money in circulation fell to N2.59 trillion in July 2023 from N2.6 trillion in June 2023, which was the first monthly reduction since N982 billion was reached in February 2023 as a result of the naira swap crisis.
Additionally, as reported by Nairametrics, a Nigerian business news publication, the amount of money held outside of banks decreased significantly from N2.26 trillion in June to N2.20 trillion in the month under review.
When it reached N3.2 trillion in July 2022, the currency in circulation, a measure of the amount of cash and coins available outside of the banking system, was at its highest level. As a result of Nigeria's high inflation and depreciating currency, it has subsequently been on the decline.
A number of things, including the growing popularity of electronic payment methods, the reduction in demand for cash, and the CBN's attempts to remove excess liquidity from the system, might be responsible for the slight decline in the amount of money in circulation.
To stabilize the naira and stop inflation, the CBN has been putting in place a number of measures, including raising the cash reserve ratio (CRR) for banks, carrying out open market operations (OMO), and changing the exchange rate regime.
These actions, however, have not been sufficient to stop the naira's decline and inflationary pressures. As of August 2023, the naira was selling at around N870 per dollar on the black market, having lost almost 40% of its value against the US dollar in the previous year. The official currency rate, which investors and exporters use, closed at around N761 to $1.
Inflation, which peaked in July 2023 at 24.08%, has continued to rise over the CBN's target single-digit range. The high pace of inflation has lowered Nigerians' buying power and raised the cost of living. The CBN has reaffirmed its commitment to achieving price stability and exchange rate stability, but given the structural and budgetary difficulties the economy is experiencing, economists have voiced skepticism about the CBN's capacity to do so.
To address the root causes of poor productivity, limited income collection, and growing debt levels, some have urged for closer cooperation between the monetary and fiscal authorities.