Nigerian Currency In Circulation Significantly Drops (SEE DETAILS)

The Central Bank of Nigeria (CBN) has reported a significant drop in the amount of currency-in-circulation in the country from N3.29tn at the end of October 2022 to N1.38tn at the end of January 2023.

This represents a decrease of N1.91tn within the three-month period due to the naira redesign policy initiated by the CBN.

The redesign policy, which was announced in October 2022, aims to replace the old N200, N500 and N1,000 notes with newly designed banknotes.

The CBN has called on all Deposit Money Banks to begin returning the existing denominations of the currency back to the CBN immediately, and customers are urged to pay into their bank accounts the existing currency to enable them to withdraw the new banknotes once circulation begins.

The CBN Governor, Godwin Emefiele, highlighted the challenges associated with currency management in Nigeria, including significant hoarding of banknotes by members of the public, shortage of clean and fit banknotes, and an increased risk of counterfeiting.

The CBN has recorded significantly higher rates of counterfeiting, especially at the higher denominations of N500 and N1,000 banknotes.

Therefore, the CBN sought and obtained the approval of the President to redesign, produce, and circulate new series of banknotes at N100, N200, N500, and N1,000 levels.

According to the CBN, currency-in-circulation is defined as currency outside the vaults of the central bank; that is, all legal tender currency in the hands of the general public and in the vaults of the Deposit Money Banks.

The CBN employs an accounting/statistical/withdrawals and deposits approach to compute the currency in circulation, which involves tracking the movements in currency on a transaction-by-transaction basis.

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.