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CBN spends N800bn on currency production destruction – is this a good use of resources

 



The Central Bank of Nigeria (CBN) recently revealed that it had spent over N800 billion on the production and destruction of currency in the last five years. This significant expenditure begs the question: is this a good use of resources? In this blog post, we'll explore the merits of the CBN's decision to invest so heavily in currency production and destruction, and assess whether or not it is a worthwhile investment for the Nigerian economy.


  • The cost of currency production in CBN 

The Central Bank of Nigeria (CBN) spends billions of naira on the production and destruction of physical currency. According to a report by the CBN, N800 billion was spent on producing and destroying currency in 2022 alone. This amount is significant and begs the question: is this a good use of resources? 

Producing currency involves a number of activities such as procuring raw materials, manufacturing the currency, and transporting it to circulation points. These activities are expensive and require time, effort, and resources. Additionally, security measures have to be taken to ensure that counterfeit notes do not enter circulation. All of this comes at a cost to the CBN. 

In terms of physical production, the CBN has a contract with various printing companies across the world for the production of banknotes and coins. This ensures that quality control is maintained and that the money produced is safe for public use. The CBN also has to ensure that enough money is printed so that there is no shortage of currency in circulation. This means more money is spent on production. 

Overall, producing currency is an expensive process that requires a great deal of resources from the CBN. However, it is important for the nation’s economy as it ensures that there is enough money in circulation to meet the needs of citizens.


  • The cost of currency destruction in CBN

The Central Bank of Nigeria (CBN) is responsible for the printing, circulation and destruction of Nigerian banknotes. The CBN spends a significant amount of money each year on currency destruction – in 2022 it spent an estimated N800bn (approximately US$2.2bn) on the process. This is a large amount of money that could be better spent elsewhere in the economy.

So what exactly does this money go towards? The currency destruction process involves shredding and pulverizing Nigerian banknotes that have been returned to the CBN as unfit for circulation. This includes banknotes that are too damaged or worn out to be used by the public and banknotes with security features that have been compromised. The shredded notes are then burned and converted into ash, which is a safe and secure way to destroy them. 

In total, the cost of currency destruction can add up quickly, and is a necessary part of running a currency system. The CBN has to ensure that any unusable banknotes are destroyed in a secure and controlled manner to ensure that they do not end up back in circulation and devalue the currency.


  • Why CBN spends money on currency production and destruction

The Central Bank of Nigeria (CBN) has recently spent N800bn on currency production and destruction. The main reason why the CBN engages in currency production and destruction is to ensure a stable and secure circulation of money throughout the economy. Currency production and destruction are necessary for two reasons: to make sure that the correct amount of money is in circulation, and to prevent counterfeiting and other forms of financial fraud. 

Currency production involves printing new notes, coins and other forms of money, as well as regular maintenance and inspection of existing notes, coins and other money. This helps the CBN to keep track of how much money is in circulation, making sure that there is not too much or too little money available. Currency destruction on the other hand, is the process of destroying old notes, coins and other forms of money that have reached the end of their life span. This helps to keep counterfeit currency out of circulation and ensures that all of the money in circulation is valid. 

The process of currency production and destruction can be costly, but it is important for the stability of the economy. By engaging in currency production and destruction, the CBN is able to maintain the value of the naira and ensure that there is enough money circulating in the economy to meet the needs of people and businesses. Without this process, it would be very difficult for the economy to remain stable and for economic growth to occur.


  • this a good use of resources?

The question of whether the Central Bank of Nigeria CBN N800 billion on currency production and destruction is a good use of resources can be a difficult one to answer. On the one hand, it is essential for the CBN to keep an adequate supply of cash in circulation to ensure economic stability. On the other, spending so much money to produce and destroy currency may seem like an excessive use of funds.

In the end it's to each individual to decide if they think the CBN spending N800 billion on currency production and destruction is a good use of resources. 

We maybe argue that this is a necessary expenseo maybe argue that it is too much money being spent on something that could be done more efficiently or cost effectively. Ultimately is up to the CBN to determine if the cost is justified considering both the benefited to the economy and the costs associated with producing and destroying currency.

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