Barely a month after the Central Bank of Nigeria (CBN) restored into circulation, higher denominations of old Naira notes in deference to March 3, Supreme Court ruling, money outside the banking system has jumped 71.4 per cent to N1.445 trillion in March, up from N843.311 billion in February.
The N602.127 billion increase in March sharply contrasts with an increase of N51.127 billion or 6.45 per cent in February 2023, from N792.184 billion as of January ending to N843.311 billion as at the end of February.
The latest CBN data of Money & Credit Statistics showed that money outside the banking system was increasing modestly until March after the apex bank directed commercial banks to comply with the Supreme Court of Nigeria landmark judgment on March 3, 2023, restored the validity of old Naira notes till December 31, 2023.
The currency outside banks hit the highest record of N2.84 trillion in October after a N108.67 billion increase to N2.84 trillion in October 2022 from N2.73 trillion in September.
On October 26, 2022, CBN Governor, Godwin Emefiele, announced the decision to redesign the nation’s currency, citing Section 2 (b) of the CBN Act 2007.
According to Emefiele, currency management by CBN had been made difficult by significant hoarding of banknotes by members of the public, with statistics showing that over 85 per cent of currency in circulation was outside the vaults of commercial banks.
“Significant hoarding of banknotes by members of the public, with statistics showing that over 85 per cent of currency in circulation are outside the vaults of commercial banks. To be more specific, as of the end of September 2022, available data at the CBN indicate that N2.73 trillion out of the N3.23 trillion currency in circulation, was outside the vaults of Commercial Banks across the country; and supposedly held by the public,” Emefiele had said in a statement.
According to him, currency in circulation had more than doubled since 2015; rising from N1.46 trillion in December 2015 to N3.23 trillion in September 2022, describing the sharp increase as “a worrisome trend that cannot be allowed to continue.”
Against this background, Emefiele triggered the CBN’s cashless policy which had been in the cooler since 2012 and embarked on an aggressive mop-up of old Naira notes as it stepped up Naira redesign of N200, N500, and N1,000 notes in circulation.
In a national broadcast on February 16, President Muhammadu Buhari claimed that N2.1 trillion out of the banknotes previously held outside the banking system had been successfully retrieved since the Naira redesign exercise, representing about 80 per cent of currency outside the banking system.
But on Friday, March 3, Justice John Okoro-led seven-member panel ruled President Buhari and the CBN out of order in a suit filed against the government by governors of the ruling All Progressives Congress (APC).
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He held that the President failed to consult the National Council of States, the Federal Executive Council, and the National Economic Council before directing the CBN to introduce new naira notes.
The apex court maintained that Buhari usurped the powers of the CBN when he issued the directive banning the old naira notes from February 10, 2023, and by doing so made the action ultra vires.
It held that the unconstitutional use of powers by Buhari on the naira re-designing breached the fundamental rights of the citizens in various ways, adding that such use of powers by the President was not permitted under democracy and was an affront to the constitution.
Among others, the Supreme Court held that the unlawful use of executive powers by the President inflicted unprecedented economic hardship on the citizens. The court also ruled CBN out of order for placing withdrawal limits on bank customers.
Less than a month after CBN complied with this Supreme Court judgment, the apex bank said that the local currency outside the banking system has risen to N1.445 trillion even though politics and slush cash spending associated with money politics are over.
However, analysts insist that the sharp increase in money outside the banking system was a direct outcome of the money politics which held sway in the March 18 governorship and State Houses of Assembly elections.
“Money changed hands during the make or mar March 18 governorship and State Houses of Assembly elections. After the February 25 presidential election with its shocking outcome, the ruling party embarked on a radical push to win by all means. We are aware of instances of cash arrest by some security agents. It is most likely that these monies are yet to find their way back to the banking system,” said Jonhson Ogbonna.
The political economist also pointed out that people who have cash could still hoard it because of the uncertainties of reintroduction of cash redesign policy in the nearest future after the Supreme Court December 31, 2023 deadline would have elapsed.
According to him, the sad experience of the cash crisis which bank customers went through while the crisis lasted could make citizens stock up cash in their houses for fear of what might happen when the new deadline is over.
It is expected that the CBN would have printed and pumped sufficient new banknotes into circulation while gradually withdrawing the old notes from circulation ahead of the December 31, 2023 deadline set by the apex court.
“We are yet to see much of the redesigned new notes. I think the CBN is yet to print sufficient new notes. The implication is that not much has changed in terms of printing more new notes since the Supreme Court ruling. The nation might be plunged into another round of crisis of scarcity of Naira notes. You can’t rule it out until we see the CBN do the needful,” said Chukwudi Ogueri, a POS operator with a string of branches across Lagos mainland.
While he did not rule out the possibility of bank customers stashing away new notes in their houses, he stated that the bulk of Naira notes being disbursed by banks is old notes.
