During her appearance before Nigerian lawmakers, Aisha Ahmad, Deputy Governor of the Central Bank of Nigeria (CBN), told lawmakers that of the nearly $1.8 billion used to manage the local currency, more than 90% of this total is allegedly used to finance expenses associated with the production of banknotes.

The rising cost of holding the Naira

According to Aisha Ahmad, Deputy Governor of the Central Bank of Nigeria (CBN), between 2017 and 2021, the main bank spent the equivalent of nearly $1.8 billion, or 800 billion Naira, managing the local currency. The production of new banknotes alone accounted for more than 90% of this figure.

According to comments posted by Punch, Ahmad, in his recent appearance before Nigerian lawmakers, also claimed that the cost of maintaining the local currency has risen by more than $22 million annually. Prior to Ahmad’s disclosure, Kingsley Moghalu, a former CBN deputy governor, had also told lawmakers that the central bank uses approximately $336 million to manage the currency.

In addition to incurring high costs associated with managing the naira currency, the CBN has to deal with the increased risk of counterfeiting, according to the report.

Meanwhile, in his testimony, Ahmad blamed part of the rising costs on what he characterized as wholesale hoarding of the naira by the Nigerian public.

“A statistically supported observation shows that cash outside banks consists of more than 80 percent of currency in circulation; worse [the] Shortage of suitable banknotes in circulation. this portends [a] negative public perception of the bank and increases [the] threat to the stability of the financial system,” Ahmad is quoted as saying.

To help the central bank overcome some of the challenges identified by Ahmad, the CBN put newly designed naira notes into circulation on December 15. At the same time, the bank said that Nigerian residents in possession of the old notes should return them sooner or later. January 1, 2023.

CBN does not target politicians

The central bank has also restricted the amount of cash that individuals and corporate organizations can withdraw. However, some Nigerian commentators have accused CBN of using the so-called naira redraw policy to attack politicians. In response to these accusations, Ahmad reportedly told lawmakers that the bank’s decision to limit cash withdrawals was based on an investigation.

“I have to make it very clear that the CBN is an independent institution and our decisions are made based on research – it is the work of many teams working together on the different boards,” Ahmad reportedly said.

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Terence Zimwara

Terence Zimwara is an award-winning journalist, author and writer in Zimbabwe. He has written extensively about the economic problems of some African countries and how digital currencies can provide an escape route for Africans.

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