By Folakemi Emem-Akpan
According to newly released statistics from the Central Bank of Nigeria, currency in circulation as at end of August 2017 improved over the level in July, growing to N1.867 trillion from N1.769 trillion in July 2017.
This was the first time since the beginning of the year that currency in circulation would grow over the preceding month’s level rather than decline. The growth recorded represents a 5.5 per cent growth rate, as compared to a 5.6 per cent decline in July 2017.
It will be recalled that currency in circulation fell to N1.769 trillion in July from N1.873 trillion in June 2017, from N1.897 trillion in May 2017, and from N1.976 trillion in April 2017. After reaching an all-time high of N2.18 trillion in December 2016, the level started to fall in January 2017, and July marked the seventh month of decline in currency in circulation.
Currency in circulation means the total amount of paper currency and demand deposits held by consumers and businesses, rather than stored by commercial banks and the CBN. The CBN pays attention to the amount of physical currency in circulation because it is present in the most liquid asset class. The more money that comes out of circulation and into longer-term investments, the less money is available to fund shorter-term consumption.
While a high level of currency in circulation should theoretically bring down the prices of goods and services, economic experts are of the opinion that this rule may not apply in times of recession.