Currency outside banks reached N2.35 trillion in September representing a 6.0 percent month-on- month (MoM) rise when compared to N2.29 trillion in August 2023.
The Central Bank of Nigeria, CBN, disclosed this today in its Money and Credit Statistics data for September 2023.
This reflects the impact of the implementation of the Supreme Court order that old N200, N500, and N1,000 notes remain in circulation till December 31, 2023.
The implementation has also been reflected in currency-in-circulation which stood at N2.76 trillion in September, increasing MoM by 3.7 percent from N2.66 trillion in August.
Recall that the part of the reasons for the Federal Government’s redesigning of the naira was to mop up excess cash outside the banking system and rein in inflation.
Meanwhile, the data showed that banks’ credit to the private sector rose MoM by 4.8 percent to N58.6 trillion in September from N55.97 trillion in August.
However, credit to the government fell MoM by 1.2 percent to N34.1 trillion in September from N34.5 trillion.
These resulted in a 2.5 percent MoM rise in Net Domestic Credit to N92.7 trillion in September from N90.4 trillion.
The federal government has been borrowing heavily in recent years to finance budget deficits driven largely by recurrent expenditures.
The Managing Director, Cowry Asset Management, Johnson Chukwu in a report titled: “Nigeria’s Economic Landscape; an overview of third quarter 2023 (Q3’23)”, said that the recent foreign exchange harmonization and revaluation effort by the CBN has further exacerbated the cost of debt servicing.
He added: “This is particularly concerning as Nigeria’s debt is denominated in both domestic and foreign currencies, rendering it vulnerable to external shocks, such as fluctuations in interest rates and exchange rates.
“Nigeria’s limited revenue base has remained a key driver of the escalating debt levels, which has raised apprehensions regarding the country’s ability to meet its debt obligations.
“Additionally, the high cost associated with servicing this debt has led to a substantial portion of government revenues being allocated to debt servicing.”