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•It’ll compound Nigeria’s exchange rate crisis – analysts •Stocks hit 17-yr high
By Chinwendu Obienyi
In the aftermath of its Naira redesign policy as well as the Supreme Court ruling, latest data obtained from the Central Bank of Nigeria (CBN) website has revealed that currency in circulation (CIC) in the country rose to a year high of N2.5 trillion by end of May 2023. This represents a 7 per cent increase from N1.37 trillion recorded in January 2023. The data also revealed that total money supply in the country fell slightly for the first time since July 2022 to N55.5 trillion as against N55.6 trillion recorded in April 2023.
Furthermore, currency outside banks also rose to N2.1 trillion in May from N2 trillion at the end of April 2023.
Currency in circulation in Nigeria has been on the rise since the Supreme Court ruled against the new Naira notes policy introduced by the apex bank in late 2022. The policy was largely criticised by most Nigerians due to its poor implementation and the spate of scarcity it created across several cities in the country.
The apex bank had stated that the policy was introduced to curb excess money supply, especially physical cash which it claimed contributed to inflation. However, some analysts who spoke to Daily Sun, warned the rise in currency circulation would suggest that the country is gradually going back to trends recorded in 2022 when the CIC grew month by month, climaxing at about N3.3 trillion in May 2022. Data from the CBN revealed that between February when the CIC was around N982 billion and May this year, it has risen by 50 per cent, the fastest seen in recent years. The Vice-President, HighCap Securities, Mr Adonri, said the rise in the CIC was due to the effect of the CBN’s Naira redesign policy and added that more Nigerians were disappointed with the policy and stopped saving in banks.
“The recent surge in currency in circulation in Nigeria was due to Naira redesign policy and with the rise in currency outside the banks, this has significant implications for inflation management and exchange rate depreciation.
As the availability of physical cash grows, there is a possibility of increased demand for foreign currencies, potentially impacting the exchange rate”, Adonri said.
For their part, analysts at Nairametrics, said, “Lower interest rates on customer deposits also affect the increase in money supply as Nigerians prefer to keep their cash than invest in fixed-income securities. There is also fear that this could compound Nigeria’s exchange rate situation”.
Meanwhile, Nigerian stocks climbed to a 17 year high as price appreciation in GTCO (+5.20 per cent), AccessCorp (+3.61 per cent) and Japaul Gold (+8.47 per cent) pushed the All Share Index (ASI) up 1.30 per cent higher to hit the 60,000 mark.
At the close of transactions on Tuesday, market capitalization grew by N493 billion in two consecutive trading sessions from the week’s opening value of N32.2 trillion to close at N32.729 trillion. Thus, the market’s year-to-date (YTD) return rose to +17.28 per cent.
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