IMF projects N4.26tn as currency outside banks


Amid the naira redesign policy of the Central Bank of Nigeria, the International Monetary Fund has projected that currency outside banking system would hit N4.26tn in 2023.

In its report titled ‘Nigeria: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Nigeria’, IMF that maintained there would  be an increase in the volume of currency outside banks despite CBN’s aggressive effort to bring in more cash into the banking system and out of the hands of the public.

The report stated that the money outside of the banking system would be up from N2.94tn in 2021 to N7.66tn by 2027.

It was also projected that the money outside bank would be N3.54tn in 2022, N5.1tn in 2024, N6.08tn in 2025 and N6.99tn in 2027.

However, the PUNCH has observed that the current amount of currency outside banks is far below the IMF’s projection of N4.26tn for 2023.

The amount of currency outside banks crashed to N788.92bn in January 2023, according to the latest data from the Money and Credit Statistics on the website of the CBN.

According to the available data, there was a decrease of 69.26 per cent between December 2022 (when it was N2.57tn) and January 2023.

This also meant that the CBN retrieved N1.78tn from the money outside banks.

The latest value of the currency outside banks for January was the lowest in 13 years, since May 2009 when the value was N764.39bn.

The data also put currency in circulation at N1.39tn in January  from N3.01tn in December, showing a difference of N1.62tn or 53.82 per cent decline.

The country has been battling with shortage cash since the central bank in October announced plans to redesign N200, N500 and N1,000, issuing the new notes on December 15 and fixed January 31 as deadline for the swap of the new notes.

But due to the crisis that trailed the exercise, the President, Major Gen. Mahammadu Buhari, on February 16, ordered the apex bank to reissue the old N200 note into circulation till April 10.

Among other things, the CBN Governor, Godwin Emefiele, had said one of the objectives of the naira design policy was to mop up currency outside the bank vaults, which he put at N2.7tn.  He said with such a huge amount outside the banking system, it would be difficult for monetary policy initiatives to impact the economy.

According to the CBN governor, this was targeted at controlling currency in circulation, curbing counterfeit currency and ransom payments to kidnappers and terrorists.

He noted, “Indeed, the integrity of a local legal tender, the efficiency of its supply and its efficacy in the conduct of monetary policy are some of the hallmarks of a great central bank.

“In recent times, however, currency management has faced several daunting challenges that have continued to grow in scale and sophistication with attendant and unintended consequences for the integrity of both the CBN and the country.”

Meanwhile, the IMF urged the CBN to be cautious of the naira design policy  because of the disruption to trade and payments being caused by a shortage of new notes, which has led to hardship for Nigerians.

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