According to the Central Bank of Nigeria’s (CBN) most recent data on currency, the amount of money in circulation decreased by N107.08 billion from N3.35 trillion in April to N3.24 trillion in July. The CBN claims that the CIC, which was N3.33 trillion in May, was N3.25 trillion in June.
Recently, the CBN issued a warning to deposit money banks advising them not to accept mutilated naira notes as they were not the actual currencies in use.
The apex bank defines currency in circulation as money that is not kept in the central bank’s vaults, i.e., all legal tender money held by members of the public and kept in the vaults of deposit money institutions.
The CBN claimed that in order to determine the amount of money in circulation in a given country, it used the “accounting/statistical/withdrawals and deposits technique.”
This approach involves tracking the movements in currency in circulation on a transaction-by-transaction basis. It said for every withdrawal made by a DMB at one of CBN’s branches, an increase in the CIC was recorded, adding that for every deposit made by a DMB at one of CBN’s branches, a decrease in the CIC was recorded.
The transactions are all recorded in the CBN’s CIC account, and the balance on the account at any point in time represents the country’s currency in circulation.
According to the apex bank, analysis of the currency in circulation showed that a large and increasing proportion of the Nigerian currency outside the commercial banking system was held by the general public hoarding a lot of the new banknotes.
The CBN recently warned Deposit Money Banks against accepting mutilated naira notes, explaining that they were not the real currencies in circulation. It added that any composed banknote discovered in the deposit of DMbs would attract a penalty of 400 per cent of the value.