Naira Redesign: Currency Outside Banks Drops By N1.8trn

Currency outside banks declined by N1.80 trillion or 68.13per cent to N843.31billion in February 2023 from N2.65trillion in November 2022, latest data re-leased by the Central Bank of Nigeria (CBN) has shown. New Telegraph’s analysis of the “Money and Credit Statistics” for February 2023 also indicates that between the end of November 2022 and the end of February this year, currency in circulation reduced by N2.18 trillion or 68.96 percent from N3.16 trillion to N982.09 billion. According to analysts, the sharp drop in currency outside banks and currency in circulation was occasioned by the CBN’s naira redesign policy under which newly redesigned N200, N500 and N1,000 banknotes were introduced to replace the old denominations.

In announcing the policy on October26,2022, CBN Governor, Mr. Godwin Emefiele, had explained that the move was aimed at tackling challenges such as, the increasing ease of currency counterfeiting, significant hoarding of naira notes, risk to financial stability as well as inflation. The CBN Governor, who announced that the new currency notes would become legal tender as from December 15, 2022, and that bank customers were expected to deposit their old notes in their accounts, had, at the time, stated that the old and new notes would circulate concurrently for a period of 45 days up until January 31, 2023, when the former will cease to be legal tender. However, following the hardship faced by members of the public in trying to access the new banknotes, Emefiele announced on January 30, that the apex bank, with the approval of President Muhammadu Buhari, had extended the deadline by 10 days, from the January 31st 2023 to February 10, 2023 to allow Nigerians still in possession of the old naira notes deposit such with their banks.

He also announced a seven- day grace period, starting from February 10 to February 17, 2023 to allow Nigerians to deposit their old notes at the CBN after the February deadline when the old currency would have ceased to be legal tender. Despite the extension of the deadline, scarcity of cash in the system persisted, resulting in an outbreak of violence in some parts of the country.

The situation led President Buhari, on February 16, to announce that the old N200 notes should remain legal tender. But some state governments, which had sued the Federal Government at the Supreme Court over the naira redesign policy, again approached the apex court over the President’s pronouncement.

The Supreme Court in its ruling on March 3, 2023, extended the validity of the old banknotes till the end of this year. In compliance with the apex court’s judgement, the CBN directed DMBs to begin receiving and paying out all the old naira notes. Toensurethatthescarcity of cash, which continued to linger despite its directive to lenders to comply with the Supreme Court’s judgement, the CBN, last Wednesday, announced that it had directed DMBs to start coming for the old N200, N500 and N1,000 notes it had earlier mopped up from them. Also, last Friday, the apex bank announced that it had directed all commercial banks to open for operations on Saturdays and Sundays.

The Acting Director, Corporate Communications Department at the CBN, Dr. Isa AbdulMumin, who disclosed this, noted that a substantial amount of cash, in various denominations, had been collected by the commercial banks for onward circulation to their customers. He further stated that the CBN had directed all DMBs to load their AutomatedTeller Machines (ATMs) as well as conduct physical operations in the banking halls through the weekends.