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By Chinwendu Obienyi
Amid the nation’s naira redesign policy, the Central Bank of Nigeria (CBN), has said that currency in circulation dropped to N982.09 billion at the end of February 2023 from N3.3 trillion recorded in October 2022.
This is even as huge crowd of customers were seen in banks’ branches and their Automated Teller Machines (ATMs) despite assumptions that the situation would ease off at the resumption of the new week.
Currency-in-circulation is defined as amount of money outside the vaults of the central bank; that is, all legal tender currency in the hands of the public and in the vaults of the Deposit Money Banks.
According to data obtained from the apex bank’s website, currency in circulation moved from N3.16 trillion to N3.29 trillion and N1.38 trillion in November 2022, December 2022 and January 2023 respectively.
However, February 2023 represents over 200 per cent decline as N2.3 trillion is said to have been mopped up from circulation during the period. 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 commercial bank at one of CBN’s branches, an increase in the CIC was recorded, and for every deposit made by a bank, at one of CBN’s branches, a decrease in the CIC was recorded.
The CBN Governor, Godwin Emefiele, in October 2022, announced plans to redesign the old N200, N500 and N1,000 notes.
Emefiele, whilst announcing the deadlines for Nigerians to swap their old notes with the new notes, lamented about the challenges associated with currency management, including the 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.
He added that in the last few years, the CBN has recorded significantly higher rates of counterfeiting, especially in regard to the higher denominations of N500 and 1000 notes. However, many Nigerians could not access the new notes despite the expiration of the deadline for the old notes, forcing businesses to close shops.
During this period, the CBN revealed that the currency outside the vaults of the banks stood at N788.92 billion as against N2.6 trillion recorded in December 2022. But the scarcity of the new notes continued. To however ease the hardship, President Muhammadu Buhari in a national broadcast, approved the continued use of the old N200 note till April 10, 2023.
But following state governments suing the Federal Government over the naira redesign policy, the Supreme Court in its ruling on March 3 extended the legal tender status of the old N200, N500, and N1,000 notes to December 31. Ten days after the court judgement, the apex bank officially ordered commercial banks to comply with the court verdict.
Although some residents, business owners and motorists were at first reluctant to accept the notes, Daily Sun investigations can confirm that the notes are currently being used to make transactions. The only stain however is the fact that long queues have continued to flood the banks across the country as some Automated Teller Machines (ATMs), mobile bank apps and Point of Sales (PoS) terminals failed to dispense enough cash.
Findings across banks in Orile, Cele, Ago and Oshodi axis, revealed that banks resumed rationing of notes from where they left last week. According to bank staffs, the huge demand for cash is currently exceeding supply, hence the need for rationing the bank notes.
Lucky Igiebor, an artisan said, “The early birds are often lucky to get N20,000 and sometimes while customers could get up to N10,000 cash from banks, others get as little as N2,000, even N1,000 after spending hours waiting.
Even the PoS operators do not have enough and because they want to meet up with their own daily demand, they give out small amount of cash to people who do not want to experience the huge queues at the banking halls”.
With its Monetary Policy meeting having kicked off yesterday, analysts have urged the CBN to review its currency management strategy and guard against complacency about the domestic economy’s ability to bend without breaking.
Macroeconomic strategist at Cordros Securities Limited, Abdulazeez Kuranga, in an emailed note to Daily Sun, said foreign investors have remained on the sidelines given the lack of FX reforms, higher global interest rates and weak macroeconomic narrative.
He noted that the CBN’s FX supply to the different FX market segments remains significantly below pre-pandemic levels.
Meanwhile, the demand for the greenback remains high as market players continue to source for FX to fulfil and clear their outstanding obligations.
Consequently, the exchange rate settled at N461.09/$1 at the official market (IEW) as of 15 March 2023 (24 January: N462.00/$1).
Moreover, total inflows into the Investors & Exporters Window (IEW) increased by 10.7 per cent m/m to $937.60 million in February (January: $847.20 million). The increase was due to higher inflows from both the local (+11.4% m/m to $816.90 million | 87.1 per cent of total inflows) and foreign (+5.9 per cent m/m to $120.70 million | 12.9 per cent of inflows) sources. That said, foreign inflows remain significantly below their pre-pandemic levels (2019FY monthly average: $1.56 billion) primarily due to the factors mentioned earlier”, Kuranga stated.
He further added that the nation’s gross FX reserve is currently at its lowest level in 18 months,declining by 2.7 per cent or $986.69 million to $36.14 billion as of 14 March, relative to the $37.12 billion at the last policy meeting held on 24 January.
“In our view, the decline likely reflects higher CBN’s intervention at the different FX markets, albeit slowly and low accretion to the gross FX reserves as PMS under-recovery costs remain bloated. Although the decline in gross FX reserve is likely to be a source of concern at this meeting, we expect the Committee to highlight the need for the apex bank to maintain its periodic FX interventions and intensify its call to the fiscal authorities to amplify their efforts in ensuring higher crude oil production over the short-to-medium term. Accordingly, the Committee will likely reiterate that the CBN should address the pressures on the local currency by boosting the FX supply for productive activities”, he said.
