Today, Friday the 4th of March 2023, Nigeria Apex Court, the Supreme Court ordered that old N200, N500, and N1,000 notes remain in circulation till December 31, 2023. The Supreme Court delivered judgment in the suit brought against the Federal Government on the Naira redesign policy by sixteen state governors.
Justice John Inyang Okoro who led a seven-man panel of Justices of the Court had earlier fixed today on February 22 for the court to make its decision known on the suit.
The supreme court order, also nullified the Federal Government’s Naira redesign policy, declaring it as an affront to the 1999 Constitution.
The prayer by the governors
The suit initially instituted by Kaduna, Kogi, and Zamfara states had thirteen other states joined to make it sixteen states challenging the legality of the federal government introduction of the Naira redesign policy.
The 16 states led by Kaduna, Kogi and Zamfara were praying the apex court to void and set aside the policy on the ground that it is inflicting hardships on innocent Nigerians.
They accused President Muhammadu Buhari of usurping the function of the Central Bank of Nigeria (CBN) in the introduction and implementation of the policy and asked that the directive issued by Buhari be voided.
On its part, the Federal Government challenged the jurisdiction of the Apex Court on the grounds that the CBN was not joined as a party and that the dispute on the policy ought to be directed at the CBN so that the suit can be referred to the Federal High Court.
CBN’s bleak extension
Recall that the CBN had extended the deadline for the swap of old N200, N500, and N1,000 from January 31 to February 10 following complaints by many Nigerians but the Supreme Court, after a suit filed by the states, held that the Federal Government, the CBN, commercial banks must not continue with the February 10 deadline pending the determination of a notice in respect of the issue.
However, President Muhammadu Buhari, in a national broadcast last Thursday, directed the apex bank to release old N200 notes into circulation to co-exist with new N200, N500 and N1,000 banknotes for 60 days — by April 10, 2023. He also said old N500 and N1,000 banknotes cease to be legal tender in Nigeria.
Currency in circulation
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.
“Ladies and Gentlemen, available data at the Central Bank of Nigeria has shown that in 2015, Currency -in Circulation was only NI.4 trillion. As of October 2022, currency in circulation had risen to N3.23 trillion; out of which only N500 billion was within the Banking Industry and N2.7 trillion was held permanently in people’s homes. Ordinarily, when CBN releases currency into circulation, it is meant to be used, and after the effusion of time, it returns to the CBN thereby keeping the volume of currency in circulation under the firm control of the CBN”.
Further the CBN also said since the commencement of the 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 left outside the banking system as at 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
“So far and since the commencement of this program, we have collected about NI.9 trillion; leaving us with about N900 billion (N500b + NI.9trilIion)….
We are happy that so far, the exercise has achieved a success rate of over 75 percent of the N2.7 trillion held outside the banking system….”
Why there will continue to be scarcity of money in circulation
From the foregoing, what is left in the circulation of the old notes may be around N500 billion or less considering urgency with which people that still has the old notes have been queuing up in banks to deposit their money before the deadlines.
It is also in the records that CBN has only been able to pump not more than N700 billion of the redesigned bills of N200, N500 and N1,000.
Furthermore, it can be concluded that the total amount of money outside banking in Nigeria today will not be more than N1.2 trillion (N500 billion old notes and N700 billion redesigned notes). This ultimately leaves a gap of over N2 billion from before the CBN started the implementation of the Naira redesign policy and now. (N3.23 trillion less N1.2 trillion)
There is already a scarcity of the Naira which has resulted in a slowdown in economic activities. The alternative banking channels are also not prepared for the unexpected surge in patronage that results from the Naira redesign policy. A large number of Nigerians still are excluded from the banking sector (58 % of adults in Nigeria between the age of 18 to 45 still don’t have bank accounts).
The Supreme Court judgment represents the expected relief Nigerians have been yearning for since the case was instituted by the governors. It will however not bring the succor expected by Nigerians until and unless the CBN decides to pump back a large percentage of over N2 trillion Naira it has harvested from the public back into the financial system. While a systemic mop-up of the same over the next 10 months to align with the amount of the redesigned notes pumped back into the system will be urged.