The implementation of the cash-less banking initiative instituted by the Central Bank of Nigeria (CBN) will push Broad Money Supply (m2) further by 25 per cent, the Managing Director, Financial Derivatives Company (FDC) Limited, Bismarck Rewane has said.
The daily cash withdrawal ceiling of N150, 000 for individuals and N1 million for corporations being implemented in Lagos State, seeks to limit the volume of cash that can be withdrawn in a day.
Speaking during the FDC Bi-Monthly Economic & Business Update, Rewane said growth in monetary aggregates is mainly a result of growth in credit to the private sector. He said the overall impact of cash-less economy will lead to an increase in total money supply by an approximate 25 per cent.
“We expect to see a continuous rise in M2, of about 25 per cent as a result of the cash-less economy reform that started in January in Lagos,” he said.
According to him, the cash-less economy reform will result in an increase in the velocity of circulation, which measures the rate at which money changes hands.
The velocity is expected to increase as transactions are carried out electronically and therefore have a one-day value date as against three days from the original norm. As money changes hands at a faster rate its price will also increase he further explained. The projection is that M2, which represents narrow money (M1) plus bank deposits, will increase due to an expected rise in demand deposits.
The CBN data showed that M2 rose by 8.93 per cent month-on-month to N13.3 trillion in December, its peak for 2011. When annualised, M2 grew by 15.40 per cent higher than the 6.9 per cent growth recorded in 2010. Other aggregates such as Narrow money (M1) and Credit to the private sector (CPS) likewise recorded increases of 17 per cent to N6.768 trillion and 4.2 per cent to N12.934 trillion respectively in December.
Demand deposits also rose to N5.523 trillion in December, a 17.36 per cent rise over November‘s figure of N4.706 trillion.
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