Aisha Ahmad, Deputy Governor, Financial System Stability, Central Bank of Nigeria, stated that the amount spent on maintaining the naira has increased by N10 billion per year.
Ahmad revealed this on Friday during her appearance before the House of Representatives to defend the CBN’s new cash withdrawal limits policy, claiming that banknote production accounts for more than 90% of currency management costs.
According to nigerianwatch findings, the apex bank spends about N150 billion per year on naira management, which has now increased by N10 billion, as declared by Ahmad in her presentation, obtained by one of our correspondents on Friday.
Dr Kingsley Moghalu, a former CBN deputy governor, previously stated that the apex bank spends approximately N150 billion per year to keep the naira stable.
He stated that the amount was used each year to produce, store, transport, protect, and destroy naira notes.
According to Ahmad’s N10 billion increase, the apex bank has spent N800 billion on currency production, storage, transportation, and destruction between 2017 and 2021.
In her presentation, Ahmad stated that currency management was a key function of the apex bank, as enshrined in Section 2(b) of the CBN Act, 2007, and that currency integrity and efficient supply of banknotes were indicators of a performing central bank, particularly in predominantly cash-based economies like Nigeria.
The deputy governor emphasized the various challenges confronting currency management, which had hampered the CBN’s ability to carry out its mandate of issuing legal tenders efficiently.
“The challenges have continued to grow in magnitude, with the attendant consequences on the bank’s policy effectiveness if left unaddressed,” she said. The public’s wholesale hoarding of naira banknotes is one of these challenges.
“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 a negative public perception of the bank and an increasing threat to the stability of the financial system.
“The bank bears high and rising costs: A review of currency management costs from 2017 to 2021 revealed an average annual increase of more than N10 billion, with banknote production accounting for more than 90% of currency management costs. This has an impact on the CBN and other participants in Nigeria’s currency management sector (banknote production, storage, processing, distribution, and destruction).”
Another challenge, according to Ahmad, was the high risk of counterfeiting, as evidenced by reports from security agencies on the rise of counterfeit-related incidents in some states, including the Federal Capital Territory.
This, she added, had negative consequences for businesses and the economy as a whole.
