Data from the Central Bank of Nigeria’s (CBN) Currency Operations Department 2020 report has revealed that the redesign of the N200, N500, and N1,000 is expected to remove some of the logistical challenges that make up a large portion of its operational cost.
This comes after the CBN stated that one of the key objectives of the redesigned denomination is to reduce the amount of cash in circulation, a key component in driving inflation.
The report revealed that the total stock of currency (issuable and non-issuable) in the vaults of the bank at the end of December 2020 was 2.79 million pieces, compared with 2.64 million pieces in 2019, indicating an increase of 3.99 percent, BusinessDay has learned.
The policy is expected to not only promote cashless policy adoption but also drive down the cost of printing new notes of these denominations, transporting them to liaison offices of the CBN, and moving them to commercial banks nationwide.
Aside from the inflationary pressure created by the increased supply of cash in the economy, the cost of printing, management, and distribution of these notes were the driving forces behind the apex bank’s increase in operational expenses.
A closer examination of the report revealed that at the end of December 2020, the total stock of N1,000 notes in circulation fell to 128.36 million pieces from 155.23 million pieces, indicating a considerable decrease of 4.59 percent. A deliberate policy action of the CBN to perhaps introduce a cashless policy that it preached and implemented gradually in the past years.
The N500 note followed a similar pattern to the N1,000 as the total bill in circulation fell to 121 million pieces in 2020, which represents a 3.99 percent drop from the 312 million pieces recorded in 2019.
However, the report showed that the N200 note followed the other lower denominations in increasing in stock. The total amount of N200 notes in circulation grew by 6.45 percent to close at 345 million pieces at the end of December 2020, when compared to 222 million pieces in the previous year.
Because large amounts of cash are issued in these denominations, the CBN believes that redesigning and limiting their supply will help reduce inflation.
Apparently, the calculated approach by the apex bank to reduce the cost of distributing currency paid off, as according to the report, “the sum of N4,585.63 million was incurred on currency distribution in 2020, compared with N5,916.72 million in 2019.”
CBN said even though the restriction on movement in 2020 due to COVID-19 was unanticipated, the 22.50 percent reduction in cost showed clearly that a deliberate policy like the redesign of the naira can help further deal with the operational cost attached to printing and distributing new notes.
BusinessDay findings from the same report discovered that of the total of 246,236 boxes of banknotes valued at N1,030,689.35 million evacuated from the Nigeria Security Printing and Minting Company (NSPM PLC) Lagos and Abuja factories to CBN branches in 2020, the N1,000, N500, and the N200 made up N1,002,408 million. This amount constituted more than 97 percent of the money printed from the NSPM factories in Lagos and Abuja.
The CBN argued that its redesign policy would help drastically reduce the 97 percent of new money printed to about 50 percent. a significant factor in driving cashless policy adoption.