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Government redesigned currency at ‘most inauspicious time’ as new CIC hits N400bn –Report

*Bismarck Rewane, Managing Director of Financial Derivatives Limited and former member of the Presidential Economic Advisory Council, in a recent report, analyses how the Central Bank of Nigeria redesigned and printed N400 billion new notes November 2022

Isola Moses | ConsumerConnect

The latest data from the Central Bank of Nigeria (CBN) has indicated the Cash in circulation (CIC) in country rose by 88 percent from N1.39 trillion 2023 January to N2.60 trillion June this year.

The Nigerian currency in circulation as of June 2023 reportedly comprised N400 billion new notes and N2.2 trillion old bank notes.

ConsumerConnect reports the Currency in circulation refers  to the amount of cash in paper notes or coins issued by the Bankers’ Bank.

Mr. Bismarck Rewane, Managing Director of Financial Derivatives Limited and former member of the Presidential Economic Advisory Council, in a report titled, “Nigeria Hits A Brickwall”, said the CBN printed N400 billion new notes, following the currency redesign programme.

Rewane noted that three of the eight denominations, including N200, N500 and N1,000 make up 90 percent total cash in circulation.

The expert explained the  reduction in the velocity of money would lower output in the informal sector of the Nigerian economy.

He also stated in the report, that “the informal sector accounts for 30 percent of formal GDP.

“It employs over 80 percent of the total population.”

Rewane further hinted that   “transactions are mainly settled in cash and Point of Sale (PoS).

“There is a linkage between the informal and formal economy.”

Government redesigned Naira notes at ‘most inauspicious time’

According to the company executive, the Federal Government, with the best intentions, decided to redesign the Naira at the most inauspicious time.

The CBN data as well  indicated that the amount of currency in circulation in Nigeria fluctuated in the first half of 2023.

In January, the CIC stood at N1.39 trillion and fell to N982,097 billion February.

However, currency circulation rose to N1.68 trillion in March. In April, May, and June, it increased to N2.48 trillion, N2.53 trillion, and N2.60 trillion, respectively.

Recall the the CBN, October 2022, had announced Naira redesigning policy, in which it redesigned N200, N500, and N1000 notes under the leadership of Mr. Godwin Emefiele as Governor of CBN.

The new notes have been circulating since November last year.

Rationale for redesigning Naira, by CBN

The Bank, however, had argued it decided to redesign the banknotes because of concerns about the management of currency in circulation, particularly those outside the banking system.

It was also noted that currency management had faced several challenges in recent years, including counterfeiting, the use of cash for illegal activities, and the hoarding of banknotes by members of the public.

At the time policy was introduced, the Bankers’ Bank explained that over 80 percent of the currency in circulation was outside the vaults of commercial banks.

However, the policy was met with widespread disapproval by several millions of Nigerian consumers of financial products and services.

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