Currency in circulation hits N2.38trn in April, says CBN

The Central Bank of Nigeria (CBN) has disclosed that currency in circulation increased to N2.38trillion in April 2023 from N1.68trillion in March 2023.

This represents an increase of 41.32 per cent.

The reported currency in circulation is the highest this year and it is on the backdrop of CBN’s suspension of its local currency redesign policy.

Currency in circulation opened 2023 at N1.39trillion, dropped to N982.1billion in February and closed March at N1.68trillion, a month after the Supreme Court said that all the old notes will remain legal tender until December 31, 2023, nullifying the Naira redesign policy.

In December, the CBN announced a currency redesign and said the old N200, N500 and N1,000 notes would stop being legal tender by February 10.

Festus Adenikinju of the Department of Economics, University of Ibadan and also a member of the Monetary Policy Committee (MPC) of the CBN, in his personal statement at the second meeting this year said: “I fear that the staff output growth forecast of 2.64% in 2023Q1 may not be realized because of the problems associated with the implementation of the currency redesign policy and the fuel queues in parts of the country for January and February 2023.

“The currency redesign policy imposed significant negative shocks on the economy as both aggregate demand and aggregate supply were constrained. The informal sector and SMEs were heavily impacted by the huge net withdrawal of cash from the economy and widespread failures of online banking transactions.

“The effects of cash withdrawals constitute a huge shock, in my view that the MPC should wait to assess their net effects on the economy and prices before considering additional rate hikes.”

Another member of the MPC, Mike Obadan of the Department of Economics and Statistics, University of Benin in his own personal statement on the Naira redesign policy said: “This is a very well-intended policy aimed essentially at achieving economic objectives, in particular, ensuring the integrity of the national legal tender, ensuring effectiveness of monetary policy, promoting the  cashless policy and financial inclusion, and checking currency hoarding and  counterfeiting.

“Unfortunately, various vested interests have worked assiduously to undermine the implementation for their private gains. Their activities compounded the unintended consequences of the implementation of the policy – hoarding of the new naira notes, shortages of the new naira notes and the attendant suffering of Nigerians at all levels, breakdown of online payments  infrastructure, etc.

“Going forward, policies like the naira redesign policy require a political economy analysis to identify its benefits, costs and social consequences with a view to also identifying various mitigation measures for the consequences – intended and unintended.”

 In addition, currency outside of banks increased by 44 per cent between March and April as the CBN increased output of cash to ease the cash crunch in the system.

Data showed that currency outside of banks soared from N1.45trillion to N2.08trilion in April.