Nigeria: Decline in Currency in Circulation Recorded After Five Months

The total currency in circulation within the country has experienced a decline, moving from N2.6tn (N2,603,266m) at the close of June 2023 to N2.59tn (N2,595,761m) by the end of July 2023.

This marks the first reduction in this figure since February 2023. Data sourced from the Central Bank of Nigeria reveals a decrease of N7.51bn in just one month.

Currency in circulation is defined as the legal tender currency present in the hands of the general public and stored in Deposit Money Banks, excluding the central bank’s vaults.

The Central Bank of Nigeria calculates this metric using an “accounting/statistical/withdrawals and deposits approach.” This approach meticulously tracks the movement of currency, transaction by transaction. Withdrawals from Deposit Money Banks at CBN branches result in an increase in currency in circulation, whereas deposits lead to a decrease. All these transactions are meticulously documented in the CBN’s Currency in Circulation account, with its balance at any given time reflecting the nation’s currency in circulation.

Before January 2023, the total currency in circulation within the country dropped from N3.29tn at the end of October 2022 to N1.38tn at the end of January 2023, largely due to the CBN’s naira redesign policy.

Figures extracted from the CBN indicate a substantial drop of N1.91tn in that three-month period.

In October 2022, the then Governor of the CBN, Godwin Emefiele, unveiled plans to redesign old N200, N500, and N1,000 notes. He also set deadlines for Nigerians to swap their old notes with the new ones.

Emefiele stated, “Accordingly, all Deposit Money Banks currently holding the existing denominations of the currency may begin returning these notes back to the CBN effective immediately. The newly designed currency will be released to the banks in the order of first-come-first-serve basis.”

He highlighted the challenges related to currency management, including significant hoarding of banknotes by the public. Statistics indicated that over 80% of currency in circulation was outside the vaults of commercial banks.