The amount spent on preserving the naira has climbed by N10 billion yearly, according to Aisha Ahmad, Deputy Governor, Financial System Stability, Central Bank of Nigeria (CBN).
Over 90% of currency management expenditures, according to Ahmad, who disclosed this on Friday while testifying before the House of Representatives in support of the CBN’s new cash withdrawal limitations policy, are related to banknote creation.
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The apex bank spent N800 billion between 2017 and 2021 on the production, storage, transportation, and destruction of the currency, according to Ahmad’s diclosure of a N10 billion rise.
As stated in Section 2(b) of the CBN Act, 2007, Ahmad stated in her presentation that currency management was a crucial responsibility of the apex bank. She also noted that, particularly in heavily cash-based economies like Nigeria, the credibility of the currency and the efficient supply of banknotes were signs of a functioning central bank.
The CBN deputy governor highlighted the various challenges facing currency management, which had affected the ability of the CBN to efficiently carry out its mandate of issuing legal tenders.
She stated;
The challenges have continued to grow in scale, with the attendant consequences on the bank’s policy effectiveness, if left unaddressed. These challenges include wholesale hoarding of naira banknotes by members of the public.
An observation supported by statistics shows that cash outside banks consists of over 80 per cent of the currency in circulation; worsening shortage of fit banknotes in circulation. This portends negative public perception of the bank and increasing threat to financial system stability.
High and increasing cost borne by the bank: A review of the cost of currency management from 2017 to 2021 indicated an average increase of over N10bn per annum and over 90 per cent of currency management costs are attributed to banknote production. This affects the CBN and other participants in Nigeria’s currency management sector (banknote production, storage processing, distribution activities and banknote destruction).
