Nigerians were taken by storm on October 26, 2022, when the CBN management announced plans to redesign the N200, N500, and N1000 notes. According to the announcement, while the re-designed notes would be released on December 15, the banking public has until January 31, 2023, to deposit the old notes in their banks. This move was said to be in conformity with the provisions of section 2(b), section 18(a), and section 19(a)(b) of the CBN Act 2007, with President Muhammadu Buhari signing off on same. Nigerians were therefore enjoined to take their old notes to the banks so they can withdraw the new banknotes once circulation begins.
The CBN Governor, Godwin Emefiele, who made the announcement at a press conference, stressed that the redesign, production, and imminent replacement of the Naira notes were in response to “several daunting challenges” plaguing the apex bank’s management of the currency and that these hitches “have continued to escalate in scale and sophistication with attendant and unintended consequences for the integrity of both the CBN and the country”. One of these challenges is the disturbing hoarding of banknotes by members of the public, with statistics revealing that over 80 percent of the currency in circulation is outside the banking system.
According to the Governor of the Central Bank of Nigeria, available data as of the end of September 2022 indicate that N2.73 trillion out of the N3.23 trillion currency in circulation was outside the vaults of commercial banks across the country; and is supposedly held by the public. Other reasons include the need to curtail the counterfeiting of notes, in addition to curbing terrorism financing by denying kidnappers ready cash as ransoms. This latest move by the CBN took 20 years in coming, whereas the global standard practice is that central banks redesign, produce and circulate new local legal tender after every five to eight years.
A trip down memory lane shows that the Nigerian currency has been redesigned over time. As part of economic reforms, the CBN on February 28, 2007, unveiled a new N20 note in a polymer substrate, while the N50, N10, and N5 banknotes; as well as N1 and 50 kobo coins were reissued in new designs, and the N2 coin was introduced. Following wide acceptance of the N20 (polymer) banknote, the redesigned N50, N10, and N5 banknotes were converted to polymer substrate on September 30, 2009. Then as part of its contribution to the celebration of Nigeria’s 50th Independence anniversary and the centenary of its nationhood, the CBN issued the N50 Commemorative polymer banknote on September 29, 2010; and the N100 Commemorative banknote on December 19, 2014.
The current anxiety in the public space over the planned redesign of the currency is quite understandable, what with the precarious state of the economy worsened by the protracted FX crisis and the runaway inflation rate. This newspaper would want to believe that the ensuing hardship is only a case of pre-dawn darkness and that the CBN knows what they are doing. Indeed, a policy that will clearly pull the monetary system of the country from the doldrums must be welcomed and supported. We commend the CBN management for taking this bold move that will tighten the supply of money, and facilitate the implementation of monetary policies.
As it were, the apex bank has already been vindicated by videos flying online of Naira bills packed in enclosed spaces much of which are even decomposing or have been defaced. So, it’s a given that quite a substantial part of the legal tender in Nigeria is not in the banking system. The government didn’t spend huge amounts of money to mint these banknotes so they can be hoarded by unscrupulous individuals. It’s a good thing that the Economic and Financial Crimes Commission (EFCC) is leveraging the mad rush to convert stashed funds into dollars, property, and others into arresting money laundering suspects.
The Commission’s Chairman, Abdulrasheed Bawa has disclosed that three governors are on the EFCC radar for planning to inject into the system humongous cash hitherto stashed in their homes through table payment of their state workers’ salaries. Other politicians and even traders have since been working out how to side-step this checkmate from the CBN. However, the Money Laundering Prohibition Act clearly stipulates that outside a financial institution, individuals can only consummate cash transactions not beyond N5 million while the ceiling for corporate entities is N10 million.
Naija News is mindful of the galloping inflation and the diminishing value of the Naira that this policy has engendered but prefers to see them as birth pangs. We welcome the fact that it will also curb the increasing ease and risk of currency counterfeiting which has become so rife that ATM terminals now dispense fake Naira notes. Indeed, there are manifest opportunities for the country’s economy to get a new lease of life from this replacement of some banknotes which can’t be lost on the CBN. At the end of the current mob up of cash from within and without the system, the CBN will be well advised to release cash to DMBs in trickles while asking them to direct their customers to electronic channels for payments, after all the eNaira is gaining such traction the CBDC has recorded transactions of $8bn.
When this restricted issuance from the CBN to the banks provokes a shortage of the new Naira notes, currency speculators would take a hit and the purchasing power of the national currency will be better for it. As we see it, by the time the apex bank tightens the supply of Naira, those now rushing to hedge their funds in dollars won’t find enough cash when they need to spend Naira. It is expected that the cashless policy will take full effect by January 2023 with a limit and heavy charges imposed on across-the-counter withdrawals in deposit money banks to further dissuade liquidity.
Naija News, however, calls on the CBN to take into consideration Nigerians in rural areas who do not have banks in their locality. Indeed, there are some local government headquarters in this country that are bereft of banks. People in such areas mustn’t be allowed to lose their life savings because they could not meet up with the deadline for depositing old Naira notes. We also demand that commercial banks must desist from the indiscriminate deductions from customers’ accounts which has forced some Nigerians to rather hold their monies than bank them.
Meanwhile, if the authorities are patriotic and dispassionate enough to pluck low-hanging fruits from this redesign of Naira notes, we don’t see how politicians can replace already-stashed cash with the new notes to buy voters during the February 2023 election. In view of the CBN’s pledge that the currency redesign exercise has no political undertone, Nigerians do not expect to see bullion vans hurling cash to politicians’ homes on Election Day. Naija News hopes that the CBN honchos are guided by altruistic reasons and the need to pull back the national economy from the brink. Emefiele and his team must be very diligent with this exercise as compensation for the further pauperization of the populace by the feverish reaction to the redesign of N200, N500 and N1000 notes. It’s in and on the CBN management to make this policy turn out a masterstroke and not a presumption!