The Central Bank of Nigeria’s recently issued audited Financial Statement released on Thursday, discloses that the CBN lowered cash in circulation from N3,322 trillion in 2021 to N3.007 trillion at the conclusion of its 2022 fiscal year.
This reflects a modest 9.4% decrease from the previous fiscal year because, in October 2022, former CBN Governor Godwin Emefiele said at a CBN briefing that the N200, N500, and N1,000 notes would be redesigned.
The former governor of the Central Bank of Nigeria claimed that one of the main goals of the redesign of the naira was to reduce the amount of cash in circulation because, in order to strengthen the economy, about 85% of it was needed to be kept inside commercial banks’ vaults.
Statistics indicate that 85% of the money in circulation was not kept in our commercial banks’ vaults. Data shows that out of the N3.23 trillion of money in circulation, N2.73 trillion was outside of commercial banks’ vaults nationwide.
In addition, he stated: “The naira series of banknotes, which we currently use, has not undergone a redesign in the previous 20 years. The bank made a fairly informed decision to fulfill the responsibility set forth in Section 2B of the CBN Act of 2007 to provide a reliable and strong legal tender.
The Naira Redesign and Cash Swaps went into effect on December 15, 2022, despite repeated warnings from institutions like the International Monetary Fund.
Even though the CBN considered the impact to be successful, there was a severe cash shortage during the 2022 holiday season.
By the end of 2022, there were 42% more e-payment transactions as a result of the implementation, which also significantly increased the demand for digital financial services provided by financial services providers.
Many experts believe that, while the policy aims were in conformity with the provisions of the CBN Act, the policy implementation method was inadequate, resulting in significant interruptions of economic operations into 2023.
Overall, despite the CBN’s efforts to limit the amount of cash in circulation, a considerable reduction has been achieved as seen by the 9.4% drop, and moving forward, the CBN must apply the lessons learnt from the design and implementation of the apex bank.