The currency in circulation in the country jumped by N701.4tn in one month to hit N1.6tn in March, 2023 after the Central Bank of Nigeria reversed its policy on the naira redesign.
According to the CBN, currency-in-circulation is defined as currency outside the vaults of the central bank; that is, all legal tender currencies in the hands of the public and in the vaults of the Deposit Money Banks.
The currency in circulation in the country had dipped by a 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 policy of the CBN.
Figures obtained from the CBN revealed that N2.3tn was mopped up from circulation during the period under review.
In a report by a research firm, Augusto&Co, titled ‘Redesign gone wrong? – Costly cashless’, while the policy was still on, it stated that, “How does the Central Bank retrieve 84.5 per cent of a country’s currency in circulation in just 90 days?
“This was one of the many questions seemingly begging for answers when Nigeria’s apex bank announced its plan to redesign the three higher value notes of the naira (N200, N500 and N1,000) on 25 October2022.”
A performance appraisal of the CBN’s execution of the redesign project would range from grossly unprepared to poorly perceived, it stated.
Speaking on the consequences during the implementation, Augusto&Co said, “Public outrage has degenerated to violent protests in some cities, with incidents of vandalism of several banks’ facilities – and PoS outlets.
“The cash crunch and the uncertainty surrounding the policy are fanning a long-simmering fire of public resentment, triggered by deteriorating economic conditions and recently exacerbated by unending petrol shortages.”
The hardest hit by the policy had been the most vulnerable members of the population (the poor, the unbanked and the rural dwellers), the report added.
It would be recalled that the Governor of the CBN, Godwin Emefiele, had in October 2022, announced plans to redesign the old N200, N500 and N1,000 notes.
The governor decried the challenges associated with currency management, including the hoarding of banknotes by members of the public, with statistics showing that over 80 per cent of currency-in-circulation was outside the vaults of commercial banks.
Due to hardships the policy subjected Nigerians to among others, some state governments sued the Federal Government over the naira redesign policy; the Supreme Court in its ruling on March 3 extended the legal tender status of the old N200, N500, and N1,000 notes to December 31.
Ten days after the Supreme Court judgement, the CBN officially ordered commercial banks to comply with the court verdict.