The amount of cash circulating in Nigeria has reached an all-time high, hitting ₦5.24 trillion in January 2025. This marks a sharp increase from ₦4.88 trillion in December 2024 and a significant jump of ₦1.22 trillion from the ₦3.65 trillion recorded in January 2024. These figures were reported by the Central Bank of Nigeria (CBN), which monitors the flow of money in the country.
Why Is There More Cash in Circulation?
Experts say this increase is due to several factors:
- More Money Printing by the CBN: The central bank has been printing more naira to keep up with government spending and economic needs.
- Rising Inflation: Inflation—where prices of goods and services keep increasing—has made Nigerians hold on to more cash to cover their daily expenses. The higher the inflation, the more money people need to buy the same items they used to afford with less.
- Public Distrust in Banks: Many Nigerians are withdrawing their money and keeping cash because they don’t fully trust the banking system. This lack of confidence in banks has led to more physical cash being used in transactions.
When Olayemi Cardoso became the governor of the CBN in September 2023, the total money in circulation was ₦2.76 trillion. Since then, it has nearly doubled.
What Does This Mean for Nigeria’s Economy?
Despite the rise in money circulation, Nigeria’s economy is not growing as fast as it should. Experts estimate that the country’s economy expanded by only 2.9% to 3.1% in 2024—one of the slowest growth rates in West Africa.
To fight inflation, the CBN’s Monetary Policy Committee (MPC) has increased the Monetary Policy Rate (MPR)—which is the interest rate banks follow when borrowing from the central bank—to 27.25%. This is the highest rate ever recorded. The move is meant to reduce the amount of money flowing in the economy, making loans more expensive so that inflation can be controlled.
However, some financial analysts believe that the government’s increased spending to ease economic hardship is also playing a role in the surge of cash in circulation. More government spending means more money enters the economy, which can push up prices and worsen inflation.
David Adnori, Vice President of Highcap Securities Limited, explains that there is always a balance between how much money is available and price stability. When too much money is in circulation, the value of the naira weakens, and prices of goods and services rise, making life harder for the average Nigerian.
Conclusion
While the increase in cash circulation might seem like a good thing at first glance, it is actually a sign of deeper economic challenges. With inflation rising and economic growth slowing down, Nigeria faces a tough road ahead. The government and the CBN will need to take stronger measures to stabilize the economy, restore public confidence in banks, and manage inflation more effectively.
