The currency in circulation in the nation decreased by 235.03 per cent to N982.09bn at the end of February from N3.29tn at the end of October 2022, on the back of the naira redesign strategy of the Central Bank of Nigeria.
Data collected from the CBN indicated that N2.3tn was cleaned up from circulation during the period under consideration.
According to the CBN, the currency in circulation went from N3.16tn to N3.29tn and N1.38tn in November 2022, December 2022 and January 2023 accordingly.
The Governor of the CBN, Godwin Emefiele, had in October 2022, revealed intentions to revamp the old N200, N500 and N1,000 notes.
Emefiele also established deadlines for Nigerians to replace their old notes with new ones.
The governor bemoaned the issues connected with currency management, including the hoarding of banknotes by members of the public, with figures revealing that over 80 per cent of cash-in-circulation was outside the vaults of commercial banks.
Additional issues, he stated included a scarcity of clean and fit banknotes with an associated poor view of the CBN and increased danger to financial stability and rising ease and risk of counterfeiting demonstrated by various security reports.
In the recent several years, the CBN has documented considerably increasing incidences of counterfeiting, particularly concerning the higher denominations of N500 and 1000 notes, he added.
Upon the expiry of the deadline for the old notes, owing to the shortage of the new naira notes, which exposed Nigerians to suffering, the President, Major General Muhammadu Buhari (retd) authorised the continuing use of the old N200 as legal money through April 10.
Nevertheless, when certain state governments sued the Federal Government over the currency redesign strategy, the Supreme Court in its judgement on March 3 extended the legal tender status of the previous N200, N500, and N1,000 notes until December 31.
On Tuesday, 10 days following the Supreme Court ruling, the CBN formally ordered commercial banks to comply with the court judgment.
According to the CBN, money-in-circulation is defined as currency outside the vaults of the central bank; that is, all legal tender currency in the hands of the people and the vaults of the Deposit Money Banks.
The CBN noted that it adopted the “accounting, statistical, withdrawals and deposits approach” to determine the money in circulation in Nigeria.
This strategy entailed monitoring the movements of cash in circulation on a transaction-by-transaction basis.
It said for every withdrawal made by a DMB at one of CBN’s branches, a rise in the CIC was recorded, adding that for every deposit made by a DMB at one of CBN’s branches, a drop in the CIC was recorded.
The transactions are all recorded in the CBN’s CIC account, and the amount on the account at any moment in time reflects the country’s currency in circulation.
The top bank claimed research on the currency in circulation indicated that a considerable and rising fraction of the naira outside the commercial banking sector was held by the people who hoard a lot of the new banknotes.
