Currency in circulation rises by 71% to N1.6tn – CBN

After the Central Bank of Nigeria changed its stance on the redesign of the naira, the amount of currency in circulation in the nation increased by N701.4 trillion in a single month to N1.6 trillion in March 2023.

The CBN defines currency-in-circulation as money that is in circulation and not stored in the bank’s vaults. This includes all legal tender money that is in circulation and stored in the vaults of deposit money institutions.

Due to the CBN’s naira redesign policy, the amount of money in circulation in the nation decreased by 235.03 percent, from N3.29 trillion at the end of October 2022 to N982.09 billion at the end of February.

According to data acquired from the CBN, N2.3tn was removed from circulation at that time.

While the policy was still in place, a research company named Augusto&Co published a paper titled “Redesign gone wrong? – Costly cashless” that asked, “How does the Central Bank retrieve 84.5 percent of a country’s currency in circulation in under 90 days?

When Nigeria’s apex bank revealed its intention to redesign the three higher value notes of the naira (N200, N500, and N1,000) on October 25, 2022, this was one of many questions that seemed to demand for explanations.

According to the report, the CBN’s execution of the redesign project will be graded on a scale from horribly unprepared to poorly perceived.

According to Augusto&Co, when discussing the effects of the implementation, “Public fury has developed into violent protests in certain places, with episodes of damage of many banks’ facilities – and PoS outlets.

“A long-simmering fire of public resentment is being fanned by the cash crunch and the uncertainty surrounding the policy, which was sparked by worsening economic conditions and recently made worse by never-ending petrol shortages.”

The report also stated that the impoverished, unbanked, and rural residents had been the group of people most affected by the policy.

Recall that the CBN Governor, Godwin Emefiele, revealed intentions to revamp the outdated N200, N500, and N1,000 notes in October 2022.

The governor bemoaned the difficulties in managing currency, especially the public’s hoarding of banknotes. Statistics showed that more than 80% of the currency in circulation was not in commercial banks’ vaults.

Some state governments sued the federal government over the naira redesign strategy as a result of the troubles it caused Nigerians, among other things. The Supreme Court’s decision on March 3 extended the legal tender status of the old N200, N500, and N1,000 notes until December 31.

Ten days following the ruling by the Supreme Court, the CBN formally instructed commercial banks to comply.