Cashless policy: Currency outside banks declines by 12.2%

By Babajide Komolafe
Currency outside banks declined by 12.2 per cent in January, indicating impact of the cashless policy of the Central Bank of Nigeria (CBN).

The cashless policy took off in Lagos on January 1st this year with the cashless Lagos policy. Though the limit on free cash withdrawals and service charge was delayed till April 1st, the increased awareness and deployment of point of sale (PoT) terminals by banks increased electronic payment transactions and hence encouraged more people to keep their money with the banks.

This is reflected in the CBN monthly economic report for January, which indicated that  total currency in circulation and currency outside banks fell during the month.

The report said, “At N1,475.53 billion, currency in circulation fell by 5.8 per

cent in the review month, compared with the decline of 2.7 per cent at the end of corresponding period of 2011. The development reflected the 12.2 per cent decline in currency outside banks during the review month.

The report also reveal that banks lent more credit to the economy in January. It said that, “At N12,664.8 billion, aggregate banking system credit (net) to the domestic economy rose by 2.1 per cent on month-on-month basis, compared with 10.5 per cent growth recorded at the end of the preceding month. The development reflected largely, the 3.5 per cent increase in claims on the private sector. On year-on-year basis, aggregate banking system credit (net) to

the domestic economy, however, declined by 4.2 per cent.

“Banking system’s credit (net) to the Federal Government, on month-on-month basis, declined by 37.1 per cent to negative N728.4 billion, in contrast to the growth of 52.7 and 34.8 per cent at the end of preceding month and corresponding period of 2011, respectively. The development reflected largely, the significant decline in banking system’s holdings of government securities. Federal government, however,

remained a net lender to the banking system at the end of the review month.

“The banking system’s credit to the private sector, on month-on-month basis, rose by 3.5 per cent to N13,393.1 billion over the preceding month’s level, in contrast to a decline of 4.2 per cent at end of the corresponding month of 2011.

Similarly, banking system’s claims on the core private sector rose by 3.8 per cent to N12,899.0 billion over the level in the preceding month, compared with 3.4 per cent at the end of the preceding month. On year-on-year basis, banking system’s credit to the private sector, however, fell by 4.6 per cent.