Cash flow surge: Nigeria’s currency in circulation climbs by 8.33% in one month
The latest figures from the Central Bank of Nigeria (CBN) indicate that the amount of currency in circulation (CIC) has reached a new peak for the year, hitting N2.99 trillion as of October 31, 2023.
This represents a significant increase of 8.33 percent, or N230 billion, compared to the N2.76 trillion reported at the end of the previous month.Moreover, the CIC has seen a dramatic rise of 115.11 percent, or N1.6 trillion, since January 2023, when it was recorded at N1.39 trillion.
The CIC includes all the currency that is not held within the banking system, as well as the cash that banks have in their vaults.Approaching the N3 trillion mark, the CIC is nearing the levels it reached in October 2023, which was N3.29 trillion, prior to the implementation of the CBN’s naira redesign policy.
This trend suggests a continued upward trajectory in the amount of currency being circulated outside the banking system.
During a meeting of the Monetary Policy Committee (MPC) in October 2022, the former CBN Governor Godwin Emefiele said that the increase in inflationary pressure was being fuelled by the prevalence of N1,000 and N500 bills in circulation.
Emefiele, who has since been removed from his position, stated in October 2022 that the banknotes of N200, N500, and N1,000 would be redesigned.
He also announced the introduction of new notes, giving a deadline for old N200, N500 and N1,000 notes.
The former governor said, “Accordingly, all Deposit Money Banks currently holding the existing denominations of the currency may begin returning these notes back to the CBN effective immediately. The newly designed currency will be released to the banks on order of first-come-first-serve basis.
“Customers of banks are enjoined to begin paying into their bank accounts the existing currency to enable them to withdraw the new banknotes once circulation begins.”
He bemoaned the difficulties of managing cash, citing widespread hoarding of banknotes as an example, with more than 80 percent of all currency in circulation stored in places other than commercial banks’ vaults.
He also mentioned the growing ease and risk of counterfeiting, as shown by a number of security reports, and the unfavourable opinion of the CBN that results from a lack of clean and fit banknotes.
The CBN’s naira redesign policy had a significant impact on the country’s currency supply, reducing it from N3.29 trillion at the end of October 2022 to N1.38 trillion by the end of January 2023.
According to the CBN’s numbers, this is a decrease of N1.91 trillion over the time under review.
Also, the total amount of naira in circulation in Nigeria dropped to N982 billion in February 2022, from N1.39 trillion in January 2023. This was the lowest level of circulating Naira since November 2008.
Essentially, the CBN mopped over N2 trillion in circulating cash between October 2022 and February 2023.
However, with the change in leadership at the apex bank, it appears that the central bank is allowing more cash to circulate.
The apex bank recently assured Nigerians of sufficient stock of currency notes at its disposal, dispelling rumours of scarcity of cash in banks and ATMs across the country.
The central bank also removed the deadline for the legal tender status of old N200, N500, and N1000 notes from the initial December 31, 2023, to forever, which likely signals a complete end to the cash scarcity crisis faced early this year.
