• Friday, March 01, 2024
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Currency in circulation up 71.41% on CBN’s supply of naira to banks

Nigeria’s Naira Woes Point to a Bigger Problem in Africa

Currency in circulation has increased by 71.41 percent after the Central Bank of Nigeria (CBN) moved naira notes from its vault to deposit money banks last month.

Naira in circulation rose to N1.68 trillion at the end of March 2023, from N982 billion in February, same year, data published on the CBN’s website showed.

Uche Uwaleke, professor of capital market at the Nasarawa State University Keffi, said currency-in-circulation followed reinjection of some old naira notes previously mopped up by the CBN into the banking system.

Increase in circulation of old naira notes also followed the extension of legal tender status of old notes to December 31, 2023.

Uwaleke said further increases are expected due to the same reasons, noting that there is a rise in deposit money banks borrowing from the CBN’s standing lending window.

Currency in circulation refers to currency outside the vaults of the central bank. It is all legal tender currency in the hands of the general public and in the vaults of the deposit money banks.

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The CBN on March 24, 2023 confirmed the evacuation of banknotes from its vaults to commercial banks across the country as part of a coordinated effort to ease the circulation of banknotes of various denominations.

The CBN also directed all banks to load their Automated Teller Machines (ATMs) as well as conduct physical operations in the banking halls through the period.

Consequently, banks across the country opened their doors to customers for withdrawals and deposits, bringing an end to long queues and pains suffered as a result of the cash crunch.

On October 26, 2022, the CBN announced that the Naira denominations of N200, N500 and N1,000 will be redesigned and introduced into the economy from December 15, 2022 while commercial banks were directed to return existing denominations to the CBN.

According to a report by FSDH research, The impact of the Naira Redesign policy has been profound for the economy and will be the major determinant of Nigeria’s economic trajectory in 2023. The associated cash crunch has led to increased pressure on the banking system, and on the financial system’s digital infrastructure. It has also resulted in the disruption of economic activities, created social tensions and distorted the trajectory of the economy.

According to the CBN, as of September 2022, N2.73 trillion out of the N3.23 trillion currency in circulation, was outside the vaults of commercial banks across the country.