October Surge: Currency in Circulation Approaches N3 Trillion, Reaching Pre-Naira Redesign Heights

The most recent data released by the Central Bank of Nigeria (CBN) reveals a notable surge in the currency in circulation (CIC), reaching a new high of N2.99 trillion as of October 31, 2023. This reflects an 8.33% increase, equivalent to N230 billion, compared to the preceding month. Moreover, it signifies a substantial rise of 115.11%, amounting to N1.6 trillion, since January 2023.

The CIC encompasses currency outside the banking system and the vault cash of banks. This significant upswing in circulation suggests a trajectory towards the October 2023 level of N3.29 trillion, before the implementation of the naira redesign policy by the CBN.

Delving deeper into the situation, during an October 2022 meeting of the Monetary Policy Committee (MPC), the former CBN Governor Godwin Emefiele attributed the escalating inflationary pressure to the prevalence of N1,000 and N500 bills in circulation. In response, he announced a redesign of the N200, N500, and N1,000 banknotes, with the introduction of new notes and a stipulated deadline for the return of the old denominations.

Emefiele expressed concerns about managing cash, citing widespread hoarding and revealing that over 80% of the currency in circulation was stored outside commercial banks’ vaults. Additionally, he emphasized the increased risk of counterfeiting, based on security reports, and the negative perception of the CBN due to the prevalence of unfit banknotes.

The implementation of the CBN’s naira redesign policy had a discernible impact, resulting in a significant reduction of the country’s currency supply from N3.29 trillion in October 2022 to N1.38 trillion by the end of January 2023. This represented a decrease of N1.91 trillion during the review period.

Furthermore, the total amount of naira in circulation in Nigeria plummeted to N982 billion in February 2022, down from N1.39 trillion in January 2023. This marked the lowest level of circulating Naira since November 2008. Essentially, the CBN withdrew over N2 trillion in circulating cash between October 2022 and February 2023.

However, with the change in leadership at the apex bank, there appears to be a shift in approach, as the central bank is now allowing more cash to circulate. The CBN has reassured Nigerians of an ample stock of currency notes, dispelling rumors of cash scarcity in banks and ATMs across the country. Additionally, the central bank extended the deadline for the legal tender status of old N200, N500, and N1000 notes from December 31, 2023, to an indefinite period, signaling a resolution to the earlier cash scarcity crisis.