*The Central Bank of Nigeria disclosed the total currency in circulation in the country reduced by 235.03 percent to N982.09billion as of the end of February 2023, attributing currency hoarding to large amounts of money outside the country’s banking system

Isola Moses | ConsumerConnect

The Central Bank of Nigeria (CBN) has disclosed the total Currency in Circulation (CIC) in the country decreased by a 235.03 percent to N982.09billion at the end of February 2023 from N3.29trillion October 2022.

ConsumerConnect reports this development is noted to be a fallout of the Naira redesign policy of the Bankers’ Bank in the West African country.

According to figures from the CBN, it is revealed that N2.3trillion was mopped up from circulation during the period under review.

The CBN also explained the currency in circulation increased from N3.16trillion to N3.29trillion and N1.38trillion November 2022, December 2022 and January 2023 respectively.

It is recalled Mr. Godwin Emefiele, Governor of CBN, October last year had announced the Bank’s plans to redesign the N200, N500 and N1,000 currency denominations.

Emefiele also restated the deadlines for Nigerian consumers to swap their old banknotes with the newly-redesigned notes.

At the time, Emefiele equally mentioned the challenges associated with currency management, including the hoarding of banknotes by members of the public.

According to CBN, statistics had indicated that over 80 percent of currency-in-circulation was outside the vaults of commercial banks.

He listed other challenges to include a shortage of clean and fit banknotes with an attendant negative perception of the CBN.

The CBN also stated the increased risk to financial stability and increasing ease and risk of counterfeiting affirmed by several security reports.

It was learnt the CBN had recorded significantly higher rates of counterfeiting in the last few years, especially in respect of the higher denominations of N500 and 1000 notes.

Consequently, after the expiration of the deadlines for the use of old notes in circulation, and in view of the scarcity of the new Naira notes leading to untold hardships of millions of consumers, President, President Muhammadu Buhari later approved the continued use of the old N200 as legal tender for 60 days till April 10, 2023.

However, after 16 state governments in the Federation sued the Federal Government over the Naira redesign policy, the Supreme Court March 3 extended the legal tender status of the old N200, N500, and N1,000 notes to December 31 this year.

Sequel to the Supreme Court judgement, the CBN officially has directed the Deposit Money Banks (DMBs) to comply with the apex appellate court’s order.

What does currency in circulation mean?

The CBN has described the currency in circulation as currency outside the vaults of the central bank.

It is all legal tender currency in the hands of the public and in the vaults of the Deposit Money Banks in Nigeria.

The banking sector regulator noted that it employed the “accounting/statistical/withdrawals and deposits approach” to compute the currency in circulation in the country.

This approach is said to have involved tracking the movements of currency in circulation on a transaction-by-transaction basis.

Every withdrawal made by a DMB at one of CBN’s branches, it stated, an increase in the CIC was recorded.

The Bank also explained that for every deposit made by a DMB at one of CBN’s branches, a decrease in the CIC was recorded.

The transactions are all recorded in the CBN’s CIC account, and the balance on the account at any point in time represents the country’s currency in circulation.

According to CBN, analysis of the currency in circulation indicated that a large and increasing proportion of the Naira outside the commercial banking system was held by the public, who have hoarded a lot of the new banknotes.