Several weeks ago when the Supreme Court (SC) passed a judgment in favor of the governors of 16 States mandating the Federal government to allow both the old Naira notes and the redesigned Naira notes to circulate together as legal tender till December 2023. The judgment was met with positiveness from the general public that the succor long-awaited to rejuvenate economic activities has finally arrived.
Although it took the Central Bank of Nigeria (CBN) 11 days after the SC judgment before it could advise financial institutions in Nigeria to start accepting and dispensing the old Naira notes to their customer. But that came, and the general public rejoiced that eventually economic activities can now resume in full gear. Most of the economic activities in the informal sectors are carried out using cash.
Recall…
According to the CBN governor, Mr. Godwin Emefiele in a press statement on the 29th of January 2023, the total money in circulation increased by about N1.83 trillion naira between 2015 and October 2022 bringing the total money in circulation to N3.23 trillion as of 2022 October. Out of this, only N500 billion is within the banking system leaving N2.7 trillion permanently outside the bank and in people’s homes.
Further, the CBN also said since the commencement of the Naira redesign program, it has been able to mop up about N1.9 trillion from the 2.7 trillion in circulation outside the banking system leaving about N800 billion left outside the banking system as of January 2023. The amount of money in circulation may even be less with the Apex bank’s statement that it has achieved 75% mop up of the N2.7 trillion
Current Situation…
The CBN governor, Godwin Emefiele, on Tuesday, stated that about N1 trillion is now in circulation. The Apex Bank governor mentioned this while briefing the press after the Monetary Policy Committee MPC meeting held in Abuja.
From the foregoing, it is obvious that the CBN has only allowed an additional N200 billion into circulation after the Supreme Court ruling which mandated it to release back into calculation all the old N1,000, N500, and N200 Naira notes confiscated from the public as a result of the currency redesign policy. And from the beginning of this policy when CBN mopped up N1.9 trillion from the public, it is still holding on to N1.7 trillion despite the public outcry and court judgment.
It should be understood that the level of trust and satisfaction with this policy and its effect has been less than desired as Naira is still being purchased in the informal sector at a rate of not less than 20% and could be as high as 45% depending on location and demand. The alternative banking channels (e-payment) that the CBN has alluded to as the motivation for this policy have also been most disappointing with business transactions trapped for days and in some cases terminated because of disappointing networks and failed transfers.
The CBN governor however apologized to Nigerians for the glitches experienced while trying to effect various e-payment transactions. Mr. Emefiele made the apology at the post-Monetary Policy Committee (MPC) briefing in Abuja on Tuesday as reported by the media.
CBN hesitance confirmed
While also briefing the public after the MPC meeting, the reluctance of the Apex Bank to release more money into circulation was confirmed when Emefiele said the CBN will assess the cash situation to ensure that people do not begin to store cash outside the banking system for personal use as obtained before the currency redesign.
