The rate at which inflation has been accelerating in the country has been a major source of concern for the Central Bank of Nigeria. It has adopted different measures to tame the surging inflation which hit a 17-year high of 21.47 per cent in November. Some of the latest steps taken by the monetary authority to address the challenge were the redesign of the naira and the introduction of a new cash withdrawal limit.
The CBN Governor, Godwin Emefiele had on October 26 announced plans to redesign N200, N500 and N1,000 notes. He said it would take effect from December 15 and Nigerians have till January 31, 2022, to exchange their old naira notes.
Emefiele explained that the redesign of the local currency became necessary to tackle inflationary problems, currency counterfeiting, insecurity and other issues plaguing Nigeria. He also stated that the naira redesign was targeted at controlling currency in circulation as well as ransom payments to kidnappers and terrorists.
“Indeed, the integrity of a local legal tender, the efficiency of its supply and 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.
“More specifically, as of the end of September 2022, available data at the CBN indicate that N2.73tn out of the N3.23tn currency in circulation was outside the vaults of commercial banks across the country, and supposedly held by members of the public. Evidently, the currency in circulation has more than doubled since 2015, rising from N1.46tn in December 2015 to N3.23tn as of September 2022. I must say that this is a very worrisome trend that cannot continue to be allowed.”
Emefiele highlighted the challenges that spurred the CBN action as significant hoarding of banknotes by members of the public; worsening shortage of clean and fit banknotes with an attendant negative perception of the CBN and increased risk to financial stability; and increasing ease and risk of counterfeiting evidenced by several security reports.
Coinciding with the recent over-the-counter memo withdrawal of N100,000 and N500,000 weekly for individuals and companies. Emefiele added that CBN would work with law enforcement agencies like the Economic and Financial Crimes Commission and the Independent Corrupt Practices and Other Related Offences Commission, to complicate and track large withdrawals.
However, despite Emefiele’s explanation, a lot of agitations greeted the announcement with many arguing that the redesign of the currency notes and the limited period given for its implementation may bring the country’s economy to its knees. The National Assembly even asked the apex to review the policy as it would have an adverse impact on the economy, but the central bank was resolute, saying no going back on the December 15 date for the introduction of the new notes.
Bank customers speak
The apex bank stuck to his gun as the redesigned naira notes went into circulation on Thursday. The PUNCH correspondents went to different banks to get the reactions of customers to the introduction of the new notes. Many of them expressed reactions, uncertain about the impacts it would have on them in the long run.
Although not many have received the new naira notes, particularly in Lagos, and Ogun State, a Zenith Bank customer, Caleb Oboagwina attested to having gotten the new notes due to the special relationship he has with the bank.
He said, “The naira redesign is not the actual issue, but the monetary policy which the Central Bank of Nigeria has decided to propose and impose at the same time.
“Every country has a similar policy to aid the appreciation of its currency.”
A media consultant, Mr Aderemi Lawrence Oluwanisola, while speaking with our correspondent at the banking hall of the United Bank for Africa in Marina, Lagos, said the decision was a waste of time and resources.
He said, “When you are talking about the creation of new notes, there is no significant impact whatsoever on the economy. It is only a mere renewal of new notes. It is only repackaging. It has no economic effect. It is like buying new clothes and discharging the old ones.
“People say it is going to stop people from keeping large sums of money in their homes, but this is not true. They will continue their act once the new notes are fully in circulation.”
Another customer, Sulaiman Ayinde, a farmer, told The PUNCH at the banking hall of the Sterling Bank in Marina, Lagos that the rationale behind the new notes was not well conceived and thought out.
According to him, “It is going to affect the economy. It is like they want to reduce the money in circulation.
“And why did they have to spend such a large amount of money to print money when those who want to keep money would continue to do so after the old ones have been taken out of circulation? So, it is a waste of effort. Whoever is behind it should be questioned.”
Meanwhile, Mr Emmanuel Anoro, believed the decision was the right one to take considering the depreciation of the naira.
He added, “The changing of new naira notes is okay. It will help to change the contaminated notes and discourage people who are keeping money inside their houses.”
He, however, explained that he was yet to fully understand the cash withdrawal limit plan. He said, “But the other one, the cash withdrawal limit, is what I don’t seem to understand. The reason behind that has not been properly explained. The new naira is okay.”
A Guarantee Trust Bank customer in Redemption Camp, Mowe, Ogun State, Wale Adeagbo, said it was a mismanagement of public funds. He said, “In all honesty, I see the naira redesign as a means by which the CBN has lawfully mismanaged the public funds. A huge amount of money was expended on this so-called redesign.
“Achieving the purpose of checkmating the kidnappers asking for ransom in cash, only time will tell of its effectiveness.”
Speaking on the new notes, a GTB customer, Ruby Natan-Utu expressed her displeasure about the aesthetics.
She said, “In terms of aesthetics, I do not like them. However, in terms of what it intends to achieve, I totally agree. The benefits outweigh the challenges. It is not in doubt that the country is corrupt and with the coming elections, some people may have lots of cash in their homes. Hence, this is the only way the cash hidden in houses to buy votes can be discarded.”
An access bank customer, Williams Akinyele said the redesigned notes are not different from the former.
He said, “It seems CBN just told their designers to add more colour to the old ones while also swapping the colours of N500 and N200 for each other. However, I think the approach isn’t bad. To some extent, it would control counterfeiting as implied by the CBN governor and possibly inflation too. It is apparent that we have too much naira in circulation. The rate at which we have people hoarding naira is alarming too. Maybe this will also solve a bit of this problem. However, the design is really ugly; the CBN could have done better.”
Femi Eden who banks with Kuda Bank noted that the notes are not aesthetically beautiful. He claimed that the objective behind the redesign is valid, as it can help checkmate vote-buying during the forthcoming general elections.
Tolulope Abimbola, a customer of Zenith Bank, said that she does not trust Nigerian politicians. She said, “Well I think that it would help curtail vote buying in cash and all of that, but I still do not trust our current breed of politicians because they always find ways to bypass laws and policies.”
An Access Bank customer, who preferred to be identified as Folashade, said that she hoped the naira redesign will help curb inflation. According to her, the new naira coincides with the cashless policy memo. “It will help curtail the circulation of excessive cash and reduce the public display of naira notes at parties and events,” she enthused.
Daniel who also banks with Access Bank noted that this will at least “help track these kidnappers who are in possession of only old notes.” He, however, added that there were downsides to the currency redesign, as those at the grassroots have been a bit sceptical. “I remember trying to purchase something in the market and the woman selling it refused to collect the money, thinking it was fake. After much persuasion and confirmation from five people that it was original, she finally collected.”
Although Isaac, a UBA customer, was excited about the introduction of new notes, he said “I hope that this will help curb the economic problems because that is what CBN has promised.”
Director, Research and Strategy at Chapel Hill Denham, Tajudeen Ibrahim told The PUNCH that he was worried about the limited timeframe given to Nigerians to swap their old naira notes for new ones.
“What this will do is lead to a rush for the new naira notes, seeing that there is limited time before the old ones become obsolete.
“This rush can come in two forms. First, rush to exchange the currency notes for the new notes. The second way is that every dollar transaction or we can say the bulk of the transactions will be changing dollars to naira,” he argued.
Ibrahim disclosed that Nigerians in the diaspora who are coming home for the holidays would join the queue to demand the new naira.
He added that the high demand will “partly help stabilise or even slightly make the local currency appreciate at the parallel market. It might also drive naira appreciation in the short term which is not sustainable.”
However, the Founder and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, explained that the timing of the disbursal of the new naira may clash with the velocity of business transactions.
He noted, “In terms of the timing, it will slow down economic activities. In this season, a lot of transactions will take place. And most of the transactions will be in cash, especially at the retail ends, informal sector level and locations outside the urban centres.
“So, as people undertake these transactions, it will get to a point where people will begin to reject the old notes because as we get closer to the deadline, the rejection rate will increase and if that happens, it will slow down economic transactions.”
Earlier reports by The PUNCH shared that ICAN recommended closer collaboration between the CBN, the fiscal authorities (i.e. the Federal Ministry of Finance, Budget and National Planning) and law enforcement agencies to preserve the integrity of the country’s financial system.
It added, “Any individual and organisation found to be contravening our monetary and fiscal regulations should be prosecuted to the full extent of the law.”
It urged the CBN to be transparent and tell the public the cost of redesigning the naira, adding that the CBN should pursue vigorously the drive for a cashless economy.