The Central Bank of Nigeria (CBN) has said that following its naira notes redesign and cash swap policy, it has since recovered N1.9 trillion worth of currency previously held outside of the banking system.
This was disclosed by the CBN governor Godwin Emefiele on Sunday, 29th January 2023, as part of his update following a meeting with President Buhari.
Emefiele noted that the apex bank has been able to reduce the currency outside the banking system to N900 billion from a whopping N2.7 trillion following the announcement of new naira notes.
Recall that President Buhari in November 2022 launched the new naira notes of N200, N500, and N1,000 denominations, which are aimed at combating counterfeiting, improving the effectiveness of monetary policy tools on inflation, as well as mopping excess liquidity.
What Emefiele said: “Ladies and gentlemen, available data at the Central Bank of Nigeria has shown that in 2015, currency in circulation was only N1.4 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 held permanently in people’s homes.”
- “Ordinarily, when CBN releases currency into circulation, it is meant to be used and after effluxion of time, it returns to the CBN thereby keeping the volume of currency in circulation under the firm control of the CBN.”
- “So far and since the commencement of this program, we have collected about N1.9 trillion; leaving us with about N900 billion (N500 billion + N1.9 billion),” he said.
Emefiele also added that the initiative has recorded over 75% success rate, out of the N2.7 trillion held outside the banking system. “Nigerians in the rural areas, villages, the aged and vulnerable have had the opportunity to swap their old notes; leveraging the Agen Naira Swap initiative as well as the CBN Senior staff nationwide sensitization team exercise,” he noted.
On deadline extension: The CBN governor also announced the extension of the deadline by 10 days to 10th February 2023 to allow for the remaining old notes in the economy to be returned to the banks.
- “A 10-day extension of the deadline from January 31, 2023, to February 10. 2023; to allow for the collection of more old notes legitimately held by Nigerians and achieve more success in cash swap in our rural communities after which all old notes outside the CBN lose their legal tender status,” Emefiele said.
- “Our CBN staff currently on mass mobilization and monitoring together with officials of the EFCC and ICPC will work together to achieve these objectives,” he added.
He also noted that a 7-day grace period from 10 to 17 February 2023 is given to Nigerians to allow the depositing of old notes at the CBN after the deadline, in compliance with Sections 20(3) and 22 of the CBN Act.
What this means: The huge recovery of circulating currency by the central bank, will help make monetary policy more effective in taming the inflation rate.
- Note that while the money supply and currency outside the banks’ vaults were still high, the CBN increased the monetary policy rate (MPR) by a combined 500 basis points in 2022, which had minimal effect on the inflation rate.
- However, with the continuous hawkish stance of the apex bank, and more people in the banking system, together with the reduction of the OTC withdrawal limit, monetary tools will begin to have more impact in combating the inflation rate, which is already at a nearly 17-year high.