The Central Bank of Nigeria‘s (CBN) redesigned policy has resulted in a significant drop in the total amount of currency-in-circulation in the country.
According to figures obtained by Investors King from the CBN, the currency-in-circulation dropped from N3.29tn at the end of October 2022 to N1.38tn at the end of January 2023. This represents a drop of N1.91tn in just a three-month period.
The CBN’s Governor, Godwin Emefiele, had earlier announced the redesign policy in October 2022, which included the redesign of the old N200, N500 and N1,000 notes. As part of the policy, Nigerians were given deadlines to swap their old notes for the new ones.
The redesign policy was implemented to address several challenges associated with currency management in the country, including significant hoarding of banknotes by members of the public, counterfeiting, and shortage of clean and fit banknotes. The CBN had also recorded significantly higher rates of counterfeiting, especially at the higher denominations of N500 and N1,000 banknotes.
Before the redesign plan, a huge figure of currency-in-circulation was recorded, with the currency in circulation rising to N2.84tn in September 2022 from N2.79tn in August. However, after the policy was implemented, the currency-in-circulation dropped significantly.
The CBN uses an accounting/statistical/withdrawals and deposits approach to compute the currency-in-circulation in Nigeria, which involves tracking the movements in currency 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 is recorded. For every deposit made by a DMB at one of CBN’s branches, a decrease in the currency-in-circulation is recorded.
The CBN’s 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 general public who hoard a lot of the new banknotes. This is one of the challenges that the redesign policy seeks to address.
