As a result of the Central Bank of Nigeria’s naira redesign policy, the country’s total currency supply decreased from N3.29 trillion at the end of October 2022 to N1.38 trillion at the end of January 2023.
According to the CBN’s figures, this represents a decrease of N1.91 trillion over the course of three months.
In October 2022, Godwin Emefiele, Governor of the Central Bank of Nigeria, made plans to redesign the previous N200, N500, and N1,000 notes.
Additionally, Emefiele set deadlines for Nigerians to exchange their previous notes for the new ones.
“Accordingly, all Deposit Money Banks currently holding the existing denominations of the currency may begin returning these notes back to the CBN effective immediately,” stated the regulator of the banking sector. The new currency will be distributed to banks in a first-come, first-served manner.
In order to be able to withdraw the new banknotes once they are in circulation, “bank customers are urged to begin paying into their bank accounts the existing currency.”
He criticized the difficulties of managing money, pointing to the public’s significant hoarding of banknotes and the fact that over 80% of the money in circulation was outside of commercial banks’ vaults.
He added that additional obstacles included a lack of mint-fresh banknotes, which led to a negative perception of the CBN and increased risk to financial stability; and numerous security reports show that counterfeiting is getting easier and more dangerous.
He stated that the CBN had noted significantly higher rates of counterfeiting in recent years, particularly for banknotes with higher denominations such as N500 and N1,000.
He stated that the naira had not been redesigned in the last 20 years, despite the fact that the global best practice was for central banks to redesign, produce, and distribute new local legal tender every five to eight years.
According to Emefiele, “the management of the CBN sought and obtained the President’s approval to redesign, produce, and circulate new series of banknotes at N100, N200, N500, and N1,000 levels” in accordance with Sections 19, Subsections A and B of the CBN Act 2007.
Before the CBN’s plan to redesign the currency, a lot of money was in circulation.
The Central Bank of Nigeria (CBN) reports that N2.84 trillion worth of currency was in circulation in September 2022, up from N2.79 trillion in August.
N2.81 trillion of the currency was in circulation in July 2022, up from N2.74 trillion at the end of June 2022. It dropped from about N2.80tn at the end of April to N2.79tn in May.
The term “currency in circulation” refers to currency that is not stored in the vaults of the central bank. that is, the apex bank believes that all currency that is legal tender is in the public’s possession and in the Deposit Money Banks’ vaults.
The “accounting/statistical/withdrawals and deposits approach” was used, according to the CBN, to determine the quantity of Nigerian currency in circulation.
Tracking the movements of currency in circulation transaction by transaction was part of this strategy.
It stated that the CIC was recorded for each withdrawal made by a DMB at one of the CBN’s branches, as well as for each deposit made by a DMB at one of the CBN’s branches.
The CBN’s CIC account keeps track of all of the transactions, and the account’s balance at any given time represents the country’s circulating currency.
The apex bank says that an analysis of the currency in circulation showed that the general public, who keep a lot of the new banknotes, held a large and growing portion of the naira outside of the commercial banking system.