February 14, 2023/CSL Research
Money Supply statistics from the CBN as of December 2022 showed that currency in circulation decreased month-on-month by 4.81% to N3.01trn from N3.16trn as of November 2022. Similarly, currency outside banks declined month-on-month by 2.98% to N2.57trn (representing 85.22% of currency in circulation) as of December 2022 from N2.65trn (representing 83.61% of Currency in Circulation) in November 2022. Between January and December 2022, currency in circulation declined by 8.39% (N275.97bn) while currency outside banks declined by 7.66% (N213bn). We had earlier noted that currency outside the banks has averaged c.84.42% of currency in circulation since the year 1960; the lowest being 72% in May 2008 and highest being 94.78% in March 1995.
The challenge of having a high proportion of currency in circulation outside the banking system has remained since independence despite previous currency redesigns and printing. Meanwhile, the Central Bank governor, Godwin Emefiele, recently said that the CBN had collected 1.9trn of the money in circulation and is left with N900bn to achieve effective implementation of the policy. While this statement is at variance with the CBN’s data as at 2022-year end, we hope that the numbers will be reflected in the January data. We reiterate that the objectives of reducing the significant amount of cash outside the banking system to ensure monetary policy effectiveness, curtail criminal activities and promote financial inclusion amongst others are strongly desirable.
That said, we believe the timing and implementation process are flawed particularly with regards to the availability of the new notes. As things stand, Nigerians pay as much as 20% of desired cash at PoS terminals to get money and ATM machines only dispense minimal cash and have very long queues. Also, the electronic banking channels have had increased transaction failures particularly at the PoS terminals. Meanwhile, the Supreme Court led by
Justice John Okoro, in a unanimous ruling, granted an interim injunction restraining the Federal Government, CBN, commercial banks etc, from implementing the 10 February deadline for the old 200, 500 and 1000 Naira notes to stop being legal tenders.
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