According to Aisha Ahmad, the deputy governor for financial system stability at the Central Bank of Nigeria, the annual cost of maintaining the naira has grown by N10 billion.
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.
According to research by Sunday PUNCH, the apex bank now spends N10 billion more annually managing the naira than it did previously, as stated by Ahmad in her presentation, which one of our journalists was able to secure on Friday.
Dr. Kingsley Moghalu, a former CBN deputy governor, has revealed that the central bank spends roughly N150 billion a year to sustain the currency.
He claimed that every year, the sum was needed to create, store, transfer, safeguard, and destroy naira notes.
According to Ahmad’s diclosure of a N10 billion increase, the central bank has spent N800 billion on the creation, storage, transportation, and destruction of currency between 2017 and 2021.
In her presentation, Ahmad stated that the efficient supply of banknotes and the integrity of the currency were indicators of a performing central bank, especially in predominantly cash-based economies like Nigeria. She also noted that currency management was a key responsibility of the apex bank as stated in Section 2(b) of the CBN Act, 2007.
The deputy governor emphasized the multiple problems with currency management that had prevented the CBN from effectively carrying out its responsibility to issue legal tender.
“The issues have continued to rise in scale, with the accompanying ramifications on the effectiveness of the bank’s policy, if left unresolved,” the speaker said. One of these issues is the widespread hoarding of naira banknotes by the general populace.
“A statistically validated observation demonstrates that more than 80% of the currency in circulation is cash held outside of banks; the lack of fit banknotes in circulation is getting worse. This forebodes a poor public opinion of the bank and a growing threat to the stability of the financial system.
High and rising costs that the bank must bear Over 90% of currency management costs are linked to the creation of banknotes, according to an analysis of the cost of currency management from 2017 to 2021, which showed an average increase of over N10 billion annually. The CBN and other actors in Nigeria’s currency management industry, including those involved in printing, processing, storing, and distributing notes, are impacted by this.
Ahmad further mentioned that another issue was the significant risk of counterfeiting, which was demonstrated by reports from security agencies on the increase in cases connected to counterfeiting in several states, including the Federal Capital Territory.
She continued by saying that this had negative effects on businesses and the economy as a whole.