New Telegraph

September 24, 2023

FDC: Old notes return may increase inflationary pressures

With the old N200, N500 and N1,000 notes deposited by banks in Central Bank of Nigeria (CBN), in line with the apex bank’s naira redesign policy, now being returned to the economy, analysts at Financial Derivatives Company Ltd.(FDC) have said that the development could lead to an increase in inflationary pressure. The analysts, who stated this in a report obtained by New Telegraph, predicted that “total cash in circulation could increase by 20 per cent if all old notes are returned back to the economy.”

They noted that if the estimated N3.2 trillion of old naira notes is added to “N600 billion of new naira notes,” total cash in circulation could rise to N3.8 trillion, thus “leading to an increase in inflationary pressure.” In its “Money and Credit Statistics” for February 2023 released last Thursday, the CBN stated that currency in circulation fell to N982.09billion in February from N1.39trillion in January.

Also, the data shows that Currency Outside Banks (COB) rose to N843.31 billion in February this year from N792.18 billion in the preceding month. As part of its efforts to ensure that the scarcity of cash, which has disrupted economic activities across the country in recent months, finally eases, the CBN had last Wednesday announced that it had directed banks to start coming for the old N200, N500 and N1,000 notes it had earlier mopped up from them. Also, on Friday, the apex bank disclosed that it had directed all commercial banks to open for operations on Saturdays and Sundays.

The Acting Director, Corporate Communications Department of the CBN, Dr. Isa AbdulMumin, who stated this, noted that a substantial amount of cash, in various denominations, had been collected by the commercial banks for onward circulation to their customers. According to him, the CBN had directed all banks to load their Automated Teller Machines (ATMs) as well as conduct physical operations in the banking halls through the weekends. “Branches of commercial banks will operate on Saturdays and Sundays to attend to customers’ cash needs,” he said, adding that the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, would personally lead teams to monitor the level of compliance by the banks in various locations across the country. New Telegraph reports that the latest Consumer Price Index (CPI) and inflation report released by the National Bureau of Statistics (NBS) indicates that headline inflation rose to 21.91 per cent in February from 21.82per cent in January.

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