In an effort to rein in inflation and take control of money supply in the country, the Central Bank of Nigeria (CBN) has announced plans to redesign and reissue the N200, N500 and N1000 currency denominations.
With four months to the 2023 general election, LEADERSHIP reports that if this policy is well implemented, it would help the election management body, INEC, to monitor campaign funding and restrict the incidence of vote buying which has become a menace to Nigeria’s  electoral system.
The CBN, which has been battling inflation, noted that with more than N2.73 trillion out on the streets from the N3.23 trillion outside the CBN vaults, it aims to take control of money supply by mopping up all cash from the economy, both within the vaults of banks and in the hands of citizens.
Accordingly, the apex said it will begin a mop up of the current naira notes in the country, and gave Nigerians about 46 days to exchange the current naira notes with the new notes.
The redesigned N200, N500 and N1000 notes are expected to be in circulation on December 15, 2022 while the current naira notes will no longer be legal tender from January 31, 2023 according to the CBN governor  Godwin Emefiele.
Emefiele, however, noted that individuals with cash at hand can begin depositing their monies into their bank accounts from Thursday,  October 27, 2022, at no cost ahead of the disbursement of the new notes, giving them 100 days to swap old notes for the redesigned notes.
The CBN governor, speaking at the press briefing, noted that the apex bank had been facing challenges in the management of the current series of banknotes and currency in circulation, particularly those outside the banking system in Nigeria.
“Currency management is a key function of the Central Bank of Nigeria, as enshrined in Section 2 (b) of the CBN Act 2007. Indeed, the integrity of a local legal tender, the efficiency of its supply, as well as its efficacy in the conduct of monetary policy are some of the hallmarks of a great Central Bank.
“In recent times, however, 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. These challenges primarily include significant hoarding of banknotes by members of the public, with statistics showing that over 80 percent of currency in circulation are outside the vaults of commercial banks.”
He furthered there has also been a worsening shortage of clean and fit banknotes with attendant negative perception of the CBN and increased risk to financial stability, and an 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.
“Although global best practice is for central banks to redesign, produce and circulate new local legal tender every five to eight years, the Naira has not been redesigned in the last 20 years. On the basis of these trends, problems, and facts, and in line with Sections 19, Subsections a and b of the CBN Act 2007, the management of the CBN sought and obtained the approval of President Muhammadu Buhari to redesign, produce, and circulate new series of banknotes at N100, N200, N500, and N1,000 levels.”
In line with this approval, the new currency to begin circulation from December 15, 2022 while the new and existing currencies shall remain legal tender and circulate together until January 31, 2023 when the existing currencies shall seize to be legal tender.
Accordingly, all Deposit Money Banks currently holding the existing denominations of the currency are to start returning these notes to the CBN immediately.
He went on: “Customers of banks are enjoined to begin paying into their bank accounts the existing currency to enable them withdraw the new banknotes once circulation begins in mid-December 2022. All banks are therefore expected to keep open their currency processing centres from Monday to Saturday so as to accommodate all cash that will be returned by their customers.
“For the purpose of this transition from existing to new notes, bank charges for cash deposits are hereby suspended with immediate effect. Therefore, DMBs are to note that no bank customer shall bear any charges for cash returned/paid into their accounts.”
He added that the present notes remain legal tender and should not be rejected as a means of exchange for purchase of goods and services.”
However, analysts have expressed mixed reactions on the CBN’s decision to phase out the three currency denominations.
The chief executive officer, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said it is difficult to see any compelling value proposition of this currency redesign idea, explaining the cost of such an action would be outrageous and disproportionate compared to the expected benefits advanced by the CBN.
Yusuf noted that “at a time when the government is grappling with high fiscal deficit, debt crisis, severe revenue crisis and underfunding of many government projects and programmes,  it is most inappropriate to embark on such a profligate exercise.
“Currency as a percentage of money supply is less than seven percent.  The exercise therefore has no monetary policy significance.”
According to him, besides, it will come with huge logistics costs, and avoidable dislocations to small businesses,  most of whom are in the informal sector.
“This is one intervention we can do without.  There are more urgent issues demanding the attention of the CBN. We have issues with liquidity in the foreign exchange market, the depreciating currency the recent Moody’s downgrade of nigeria, soaring inflation and many more.
“The CBN should save the citizens and the economy the trauma of this currency redesign.  It is a distraction we can do without.”
On the other hand, the Economic and Financial Crimes Commission (EFCC) has applauded the move by the CBN to redesign and reissue higher denominations of the Nigerian currency, the Naira.
Responding to the development, the executive chairman of the EFCC, Abdulrasheed Bawa described the move by the apex bank as “a well-considered and timely response” to the challenges of currency management which has negatively impacted the country’s monetary policy and security imperatives.
Bawa, in a statement signed by the EFCC chairman, Wilson Uwujaren, said “The EFCC, the CBN and some other regulators in the financial sector have worked closely in the recent past to determine how best to stabilize 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”, he 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 CBN to ensure seamless withdrawal of the old currencies.
Bawa, however, warned that EFCC will monitor the process to ensure that unscrupulous players and currency speculators and their cohorts among the BDCs do not undermine the exercise.
He also charged banks to be alive to their reporting obligations and not assist unscrupulous customers in laundering suspected proceeds of crimes through their system.
Also, the Inter-party Advisory Council (IPAC) and Civil Society Organisations (CSOs) in the country have disagreed over the introduction of newly designed naira notes.
Speaking to LEADERSHIP last night, the chairman of IPAC, Yabagi Sani said the introduction of the newly designed notes will not affect the 2023 general elections.
“It’s a normal thing. It is not in any way affecting the value of the currency. Normally, CBN can phase out the old notes.
“When they say they are changing the naira, it is about changing the colors and the features. That is not a problem. The old ones will be valid,” Sani said while urging Nigerians not to panic.
But the CSOs have frowned at the CBN plans, adding that such a step will cause panic and affect the value of the naira more.
The CSOs who spoke to LEADERSHIP are Transparency International (TI), the Civil Society Legislative Advocacy Centre (CISLAC), and the Transition Monitoring Group (TMG).
Speaking through their leader, Awwal Musa Rafsanjani, the CSOs said the government must handle the naira issue with caution at a critical time like this.
“It is important that the government handle this issue in a manner that will not affect public interest. CBN had all the time to do it but waited until the last minute of the current tenure.
“They must tell us why at this time because we will spend a lot of money on this currency rebranding. This is a time when the country is crying that there is no money. How will they take such a decision without communicating with the National Assembly?
“We are against it because of the following reasons: The timing, the cost involved and the fact that it will cause panic,” Rafsanjani said.
“The CBN new plan will cause panic because it is an issue that ought to have been discussed on time. We should do things in a timely and good manner. We need to know the cost implications because the current government has a few months to go.
“The introduction of a newly designed notes is not going to help the collapse of the currency. As they are doing it without planning, we don’t want our currency to collapse,” the CSOs added.
On his part, author at 21st Century Chronicle, Mahmud Jega, said the timing of the currency change is not right.
According to him, a change of currency close to the elections is bad. “The biggest question is, why did CBN spring this trauma upon us in the middle of a general election campaign? Emefiele said the Federal Executive Council [FEC] approved it. Including the timing? Why not wait until after the election at least? The campaigns will be turned upside down in the next few weeks, right until election eve, as people abandon everything else and scramble to change their money.
“The timing is very bad. It is remarkable that the Federal Executive Council approved such a potentially disruptive and traumatic event in the middle of a general election campaign.”
He also noted that people living in the rural areas will suffer more as “they don’t have as many banks. The rural economy is still mostly cash-based, hence they have the biggest challenge of deposing old money in the banks.
“To folks old enough to remember the currency change exercise undertaken by the Buhari military government in 1984, Emefiele’s announcement that the N200, N500 and N1000 notes will cease to be legal tender at the end of January next year was the sudden revival of a nightmare. He said new notes will be introduced in mid-December to replace the old notes.
“CBN and government might well have a good reason to change our currency notes. Emefiele said 80% of our notes are held outside the banking sector, which he said triggered inflation and weakened the naira against foreign currencies. This was more or less the same reason that Chief of Staff, Supreme Headquarters, the late Major General Tunde Idiagbon, gave when he suddenly made a radio and TV broadcast one evening in April 1984, closed all borders and announced the currency change. Emefiele gave the added reason that kidnappers, bandits and terrorists are holding a lot of money which they got through ransom payments. He also expressed hope, guardedly, that the measure could lead to a naira appreciation.
“In Nigeria, a currency change exercise has to be undertaken with the utmost secrecy, otherwise it loses its fangs because the targeted people will rush and deposit the monies in banks. Buhari/Idiagbon’s 1984 exercise was so secretive that the 20 other members of the Supreme Military Council [SMC] were caught unawares. One SMC member’s wife was caught with a lot of money on her farm. The new currencies were printed abroad, flown into the country by Airforce planes before Idiagbon made his shock announcement. Emefiele borrowed a leaf, with slight modification.
According to Jega, the 1984 exercise was one of the most traumatic events in the history of Nigeria with some people at the time likening it to the civil war.
“All Nigerian towns were turned upside down as thousands of people lined up outside every bank trying to deposit and, if possible, withdraw some money. Queues outside banks made the current fuel queues look like toys. People ate and slept in the queues; no one dared leave his place in the queues because it took so long to arrive there.
“Meanwhile, all trading ground to a halt because traders will not accept old currency, even though there was a month to go before it became illegal tender. By the time new notes emerged from the banks, a two-tier price system developed in the economy,” he recalled.
CBN Should Lower Physical Cash In Circulation By 80% – Prof. Onalo
On his part, the registrar, Institute of Credit Administration of Nigeria (ICA), Prof. Chris Onalo, in an exclusive Interview with LEADERSHIP yesterday, urged the CBN to take advantage of the old notes overhaul to control the number of physical cash in circulation by 80 per cent.
According to him, the country did not need more than 20 per cent of the current cash in circulation, if truly it indeed wants the economy to go 100 per cent cashless soon.
“It is also an opportunity for the CBN to begin to downplay the use of physical cash in business transactions in its move toward its cashless economy policy. The cash in circulation should not be more than 20 per cent of the current physical cash in the system. The new move provides the apex bank the opportunity to have full control of the volume of physical cash in the system and I will advise they take advantage of the notes change to do that,” he pointed out.
Stating that CBN ought to have made the move earlier in respect of the huge mutilated notes in circulation, he added that this will ensure that those who may have stocked naira notes outside the banking system will have no option than to bring them into the banking system in a bid to change them to the new notes.
© 2022 Leadership Media GroupAll Rights Reserved.
© 2022 Leadership Media GroupAll Rights Reserved.


Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like

Why over 200 soldiers applied for retirement – Nigerian Army – Premium Times

FILE PHOTO: Troops of the Nigerian Army. [PHOTO CREDIT: Official Twitter handle…

Team Nigeria and Birmingham 2022 – Daily Sun

The performance of Team Nigeria at the 2022 Commonwealth Games in Birmingham,…

2023 General Election: A Decider On Nigeria's Democracy And Unity – Nigerian Observer

By RICHARD EWEKA 12 hours ago POLITICS Leave a comment 41 Views…

Nigerian students protest lecturers strike, block Lagos traffic – Reuters