In what it described as a move to counter terrorism financing, hoarding of banknotes by members of the public and the increasing ease and risk of counterfeiting, the Central Bank of Nigeria (CBN) has said it will start circulating newly redesigned N100, N200, N500 and N1000 naira notes from December 15.
CBN governor, Godwin Emefiele who disclosed this yesterday during a special briefing said the naira notes were redesigned following approval by the federal government.
It was learnt that although the global best practice is for central banks to redesign, produce and circulate new local legal tender every 5–8 years, the naira has not been redesigned in the last 20 years.
But some observers have differed on the viability of redesigning the naira with some saying it would have a positive impact on the economy while others said nothing will change.
CBN gov justifies decision
According to Emefiele, “In recent times, currency management has faced several daunting challenges that have continued to grow in scale and sophistication with attendant and unintended consequences for the integrity of both the CBN and the country.”
He said there was significant hoarding of banknotes by members of the public, with statistics showing that over 85 per cent of monies in circulation were outside the vaults of commercial banks.
He said, “N2.73 trillion out of the N3.23 trillion in circulation exists outside the vault of the commercial banks.
“Evidently, currency in circulation has more than doubled since 2015, raising from N1.46 trillion in December 2015 to N3.23 trillion as at September 2022,” he added.
He explained that the CBN was convinced that the incidents of terrorism and kidnapping will minimise as access to large volumes of money outside the banking sector used as a source of funds for ransom payment will begin to dry up.
He also said the worsening shortage of clean and fit banknotes as well as the increasing ease and risk of counterfeiting evidenced by several security reports.
“Indeed, recent development in photographic technology and advancements in printing devices have made counterfeiting relatively easier. In recent years, the CBN has recorded significantly higher rates of counterfeiting, especially at the higher denominations of N500 and N1, 000 banknotes,” Emefiele added.
He also noted that in line with the transition from old notes to new ones, bank charges for cash deposits have been suspended with immediate effect.
The governor explained that the new and existing naira notes shall remain legal tender and circulate together until January 31, 2023, when the existing currencies shall seize to be legal tender.
Banks asked to return old notes to CBN
All deposit money banks currently holding the existing denominations of the currency were expected to begin returning these notes to the CBN effective immediately, as the newly designed currency will be released to the banks on a first-come-first-serve basis, the governor said.
Bank customers were also expected to begin paying into their bank accounts the existing currency to enable them to withdraw the new banknotes once circulation begins in mid-December 2022.
New naira will be positive to economy – Prof Uwaleke
Reacting to the latest announcement by the CBN, a finance analyst and President, Association of Capital Markets Academics of Nigeria (ACMAN), Prof. Uche Uwaleke said the decision to replace some naira denominations with new ones will be positive for the economy in the medium to long term.
Speaking to Daily Trust, he said, “Although the measure does not amount to demonetisation of big currency notes often carried out by central banks to curb black money and corruption, it will go a long way in ensuring that a lot of naira notes circulating outside the banks are crowded in.
“If it leads to large deposits in banks, it means the banks will have more money to lend which may reduce interest rates.
“I also think it may have the effect of reducing speculative attacks on the naira in the parallel market,” he said.
Uwaleke urged the Financial Intelligence Unit to be on the watch for huge deposits as a way of monitoring illegitimate transactions.
“Despite the huge cost involved in changing currency notes, I think it is time to sanitise the system, especially now that electioneering activities have kicked off,” he added.
Uwaleke, however, stated that the deadline of Jan 31 2023 was short in view of the number of naira denominations involved, from 100 to 1000, and urged the CBN to consider extending the dateline.
Money from corruption held in US dollars- Ogagavworia
A forensic expert, Mathew Ogagavworia said on the surface, it is a good policy to redesign the naira but said that the apex bank needed to disclose the cost of the redesign and reprinting to the Nigerian economy.
“In my view, most of the corruption money is held in US dollars. What we are likely to see is that more of those holding these illicit funds will change them to US dollars and allow the BDCs to move the naira to the banks since charges have now been lifted.
“The immediate implication is that it will drive up the black market rate of the dollar,” he said.
Ogagavworia argued that the policy was not deep enough and would require the collaboration of the security agencies to interrogate large sum deposits.
“There is also the need for legislation to support the CBN move to check the huge amount of money outside the banking vault.”
EFCC to clampdown on hoarders, lauds CBN
The Economic and Financial Crimes Commission (EFCC), has applauded the move by the CBN to redesign and reissue higher denominations of the naira.
Reacting to the development, its chairman, Abdulrasheed Bawa described the move by the apex bank as “a well-considered and timely response” to the challenges of currency management.
“The EFCC, the CBN and some other regulators in the financial sector have worked closely in the recent past to determine how best to stabilise the country’s monetary policy environment.
“It is heart-warming that the CBN has demonstrated courage in taking this bold decision, which I believe will bring sanity to the currency management situation in Nigeria,” Bawa was quoted to have said.
He called on operators in the Nigerian financial services sector, especially deposit money banks and Bureau De Change operators to work within the guidelines provided by the apex to ensure the seamless withdrawal of the old currency.
Process will cost taxpayers- Northern forum
The leadership of Concern Northern Forum (CNF) has raised the alarm that redesigning the currency will cost the country huge sums of money at the expense of taxpayers and will add no value to the current multiple economic challenges the nation is facing.
Addressing a press conference in Kaduna yesterday, the spokesperson for the group, Comrade Abdulsalam Kazeem, said, “We will lead a massive protest across the northern states and the Federal Capital Territory (FCT) if the CBN governor is not sacked if the process of redesigning the naira is not suspended and the prosecution of those behind the decision.”
“The redesigning of the said currency will only cost our nation huge sums of money at the expense of taxpayers. This is coming at a period when we are borrowing to fund significant parts of our annual budget and another significant part of the borrowing goes to debt servicing and yet the only solution the apex bank can offer is to redesign our currency.”
