By Sodiq Adelakun
The Central Bank of Nigeria (CBN) has pumped N701.4 billion back into circulation in March 2023 as currency in circulation rose to N1.68 trillion, a 71.4 per cent increase compared to N982.1 billion recorded as of the previous month.
This was obtained from the Central Bank of Nigeria’s website data.
The currency in circulation reversed its downward trend, which had fallen to a 14-year low of N982.1 billion in February 2023.
However, the surge in the circulating currency is likely on the back of the judgment by the Supreme Court to return old notes back into circulation following a case brought to court by state governors who were against the policy.
Further analysis showed that about 86 per cent of the circulating currency is outside the banking system. This is around the same as recorded last year in October when the CBN announced the naira redesign policy.
The rise in circulating currency in the country is despite the contractionary measures adopted by the central bank. The CBN in the same direction as other central banks of the world has consistently raised the monetary policy rate (MPR) in the last ten months.
Specifically, between May 2022 and March 2023, the benchmark interest rate has been increased by 650 basis points from 11.5 per cent to 18 per cent per annum, with the aim of taming the rising inflationary pressure in the country.
The CBN adopted a twin approach of interest rate hikes and naira redesign to mop excess liquidity from the economy, whilst encouraging cashless policy.
However, a series of events characterised by an intense cash crunch and high cost of goods and services ensured the failure of the naira redesign policy.
The inability of the banking system to onboard the massive influx of mobile users triggered a massive cash scarcity as well as unsuccessful online transactions, which was exacerbated by several reports of account hacks and fake alerts.
Following the impact of the cash crunch on the populace, the Supreme Court ruled that the old notes be brought back into circulation, resulting in a surge in the amount of cash in the system.