The Central Bank of Nigeria (CBN) has reduced the money in circulation due to the current inflation. Last week, the revenue shared among the three tiers of government could not boost the quantity of money in circulation, because the financial system regulators had sold debt instruments to mop up the cash.
The apex bank used the Open Market Operations to withdraw N8.3 billion, while the short-dated treasury bill’s issuance attracted N177 billion. Besides, the week also coincided with the period of Cash Reserve Ratio deductions.
Meanwhile, the attractive interest rate’s offer for investors and government guarantee have become the allure for huge investor-turnout, which are mostly patronised by banks.
The implications are that rather than lend to the real sector operators, banks would stake more for fixed income securities, which are risk-free because they are guaranteed by government.
“Against our expectation, secondary market instruments witnessed significant interest as investors channeled the demand from the primary segment which could not be fulfilled, while leveraging on attractive yield in the secondary market,” analysts at Afrinvest Securities Limited said.
The Executive Director at BGL Capital Limited, Femi Ademola, said there is no money in the economy like it used to be and this has lasted for over two years.
The CBN Governor, Godwin Emefiele, had affirmed that states lost an average of N2 billion monthly in federal allocations due to the sliding fortunes in crude oil prices, which affected monthly national distributable.
He listed the shortage of money in the economy as one of the challenges facing the country, which he described as “a crucial point” in history, because the economy is in recession.
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