The Central Bank of Nigeria (CBN) has reported a significant drop in the currency in circulation in the country following its redesign policy that plunged the nation into untold hardship.
The figures obtained from the CBN by Investors King revealed that N2.3 trillion was mopped up from circulation from October 2022 to February 2023, resulting in a 235.03% decline to N982.09 billion from N3.29 trillion reported at the end of October 2022.
The Governor of the CBN, Godwin Emefiele, had in October 2022, announced plans to redesign the old N200, N500 and N1,000 notes to address several challenges associated with currency management, including hoarding of banknotes, shortage of clean and fit banknotes, and increased risk of counterfeiting.
The CBN employed an “accounting/statistical/withdrawals and deposits approach” to compute the currency in circulation in Nigeria. This approach involved tracking the movements of currency in circulation on a transaction-by-transaction basis.
For every withdrawal made by a Deposit Money Bank (DMB) at one of CBN’s branches, an increase in the currency in circulation was recorded, and for every deposit made by a DMB at one of CBN’s branches, a decrease in the currency in circulation was recorded.
The apex bank said analysis of the currency in circulation showed that a large and increasing proportion of the naira outside the commercial banking system was held by the public who hoard a lot of the new banknotes.
At the expiration of the deadline for the old notes, due to the scarcity of the new naira notes, President Muhammadu Buhari approved the continued use of the old N200 as legal tender till April 10.
However, after some state governments sued the Federal Government over the naira redesign policy, the Supreme Court in its ruling on March 3 extended the legal tender status of the old N200, N500, and N1,000 notes to December 31.
The drop in the currency in circulation has caused some hardship to Nigerians, and the continued use of old notes as legal tender has been approved to ease the situation.
The CBN has ordered commercial banks to comply with the Supreme Court verdict and extend the legal tender status of the old notes.
