March 20, 2023/CSL Research

Based on the new Money Supply statistics from the CBN, the currency in circulation in the country has dipped by 235.03% to N982.09bn in February from N3.29tn in October 2022, largely on the back of the Naira redesign policy of the Central Bank of Nigeria. These figures revealed that N2.3tn was mopped up from circulation during the period under review. According to the CBN, the currency in circulation has moved from N3.16tn in November 2022 to N3.29tn in December 2022 to N1.38tn in January 2023 and N982.09bn in February 2023. We had earlier noted that currency outside the banks had averaged c.84.42% of currency in circulation since 1960, the lowest being 72% in May 2008 and the highest 94.78% in March 1995. 

In a bid to reduce the high proportion of currency in circulation outside the banking system, the Governor of the CBN, Godwin Emefiele had in October 2022 announced plans to roll out redesigned Naira notes and phase out of the old Naira notes. The governor had decried the challenges associated with currency management, including the hoarding of banknotes by members of the public, with statistics showing that over 80% of currency-in-circulation was outside the vaults of commercial banks. The CBN had highlighted the need to reduce the significant amount of cash outside the banking system to ensure monetary policy effectiveness, curtail criminal activities, and ensure financial inclusion. 

We note the challenges that came with the implementation of these policies. The unavailability of the new notes created untold hardship for Nigerians, with citizens unable to get cash which hindered their day-day activities. Also, the inability of banks’ E-payment infrastructure to cater to the increase in electronic payment usage resulted in an increase in failed on-line transactions. That said, we expect the decision of the CBN to recirculate the old notes till December to ease the hardships of Nigerians and ensure economic activities return to normal in the country.