The amount of currency circulating in the Nigerian economy experienced a reduction for the first time since February 2023, dropping from N2.6tn at the end of June 2023 to N2.59tn by the end of July 2023.
According to data sourced from the Central Bank of Nigeria (CBN), this decline represents a N7.51bn drop in a span of one month.
Currency-in-circulation is defined as currency outside the vaults of the central bank; that is, all legal tender currency in the hands of the general public and in the vaults of the Deposit Money Banks (DMB), according to the apex bank.
The CBN stated that it employed the “accounting/statistical/withdrawals and deposits approach” to compute the currency in circulation in Nigeria.
This approach involved tracking the movements of currency in circulation on a transaction-by-transaction basis.
It said for every withdrawal made by a DMB at one of CBN’s branches, an increase in the CIC was recorded, adding that for every deposit made by a DMB at one of CBN’s branches, a decrease in the CIC was recorded.
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The transactions are all recorded in the CBN’s CIC account, and the balance on the account at any point in time represents the country’s currency in circulation.
Before this reduction, the total currency-in-circulation witnessed a significant drop from N3.29tn at the end of October 2022 to N1.38tn at the close of January 2023, following the naira redesign policy initiated by the CBN.
The suspended Governor of the CBN, Godwin Emefiele, announced the decision to redesign N200, N500, and N1,000 notes, introducing new currency notes and urging the public to exchange their old notes with the redesigned ones.
The suspended governor said, “Accordingly, all Deposit Money Banks currently holding the existing denominations of the currency may begin returning these notes back to the CBN effective immediately. The newly designed currency will be released to the banks in the order of first-come-first-serve basis.
“Customers of banks are enjoined to begin paying into their bank accounts the existing currency to enable them to withdraw the new banknotes once circulation begins.”
He decried the challenges associated with currency management, including significant hoarding of banknotes by members of the public, with statistics showing that over 80 per cent of currency-in-circulation was outside the vaults of commercial banks.