…there is too much shortage of cash
By Simon Osigwe
The shortage of cash in the banking system, particularly in the South East and South South is the manifestation of the flaws on our Monetary Policy regime and indeed the macro-economy.
It also explains why the economy is in deep recession. The CBN had been busy managing the foreign exchange market and neglecting the money supply needs of the economy.
The CBN, usually should have a strong research department that never sleeps. They should factor in population growth and migration in monetary policy formulation.
It is this information that should guide the level of money supply, M1 and M2. But the CBN had been busy contracting the economy in an attempt to manage forex. And the cashless regime had made them not see the need to grow M1 as the population is growing. Obviously, they had not been printing enough Naira because of challenges with forex.
It is also obvious that Nigeria’s Minting Company has not been working, like our refineries. Therefore, our cash is printed abroad. If CBN did not have enough Dollar to import fuel, they also do not have enough to print the Naira. This is the primary reason for the shortages.
In the past, at Christmas, you would see new currency notes around, but how many have you seen this year? I had wondered why banks only dispense N1000 and N500 notes and hardly the other denominations these days. They are simply not printed.
So, it is too sad to say that, the banking system have come to the shocking reality that the cash in circulation is not adequate for the present size of the economy. This is part of the bigger problems of our macro-economy.
Need it repeated that our macro-economic managers, must put on a more flexible and workable thinking caps?