From Uche Usim, Abuja
Nigeria’s economy is mutating. It is shifting from cash to a cashless system and has booked its space on the global business arena where FinTech, financial inclusion, e-commerce and e-money are the new order.
To ensure Nigeria is not bullied out of the global financial ecosystem, the Central Bank of Nigeria (CBN) is administering a cocktail of strategic monetary policy initiatives to deepen global competitiveness.
Among the strategies is the unwavering determination to wean Nigerians off the addiction to cash spending which comes with a myriad of challenges.
So, on October 25, the Central Bank of Nigeria (CBN) Governor, Mr Godwin Emefiele, shocked currency hoarders and speculators when he announced the immediate redesigning of the ₦200, ₦500 and ₦1000 banknotes, while the existing notes would be confined to the dustbin of history by January 31, 2023. The last exercise was 20 years ago.
The unsettling annoucement caused ripples in various quarters, including the National Assembly where lawmakers frustratingly asked for extension of deadline.
While that simmered, truckloads of decayed naira notes surfaced in various bank counters.
Between October 26 and November 18, the CBN said over N165 billion old notes have been absorbed by commercial banks.
Though the volume was below compared to anticipated thresholds, the apex bank is hopeful that much more would be deposited as the deadline draws nearer.
Economic experts have applauded the CBN for this bold move.
They insist that as a nation battling deep-rooted insurgency, banditry, kidnapping and other crimes, allowing trillions of naira outside the banks will turn Nigeria into a gangsters’ paradise since criminals can transact their nefarious businesses totally eclipsed from the banks and security agencies’ radars.
The CBN Governor, Mr Godwin Emefiele, insists that the new naira notes would be insulated from risk the risk of counterfeiting by financial vampires.
Other concerns that motivated the decision to ditch the old naira is the high cost of currency management.
The CBN Governor listed the benefits of the redesigned naira notes to include; enhanced security, greater durability, attractiveness and promotion of rich cultural heritage.
This effort is expected to yield numerous benefits; including the adoption of electronic channels, which is in tandem with global best practices.
According to Emefiele, as at the end of September 2022, available data shows that N2.73 trillion out of the N3.23 trillion currency in circulation, was outside the vaults of commercial banks across the country; and supposedly held by the public.
“Evidently, currency in circulation has more than doubled since 2015; rising from N1.46 trillion in December 2015 to N3.23 trillion in September 2022. This is a worrisome trend that cannot be allowed to continue”, he said.
Statistically, over 85 percent of currency in circulation are outside the vaults of commercial banks, a worrisome development experts said should not be condoned as currency hoarders can easily gang up against constituted authorities and vandalise the levers of governance.
On how the new notes will permeate various rural communities, Emefiele said the apex bank was working with over 1.4 million Shared Agent Network Expansion Facilities (SANEF) operators to ensure no part of the country is left unconvered.
The President, in his remarks at the unveiling highlighted the importance of redesigning the naira notes, saying it will help the country to address the issue of illicit financial flows, corruption, improve the economy and the value of the Nigerian currency.
He noted that the currency redesign will also help the Central Bank of Nigeria’s Monetary policy initiative.
Buhari noted that the first set of currency, which was printed locally by the Nigerian Security Printing and Minting Company, will prevent counterfeiting of the notes.
He, however, appealed to Nigerians to embrace the new policy to redesign the naira.
He also added that the new banknotes would help the Central Bank design and implement better monetary policy objectives as well as enrich the collective memory of Nigeria’s heritage.
While N165 billion old naira notes have so far been absorbed by commercial banks, the apex bank said the amount deposited thus far was small compared to what it had anticipated.
The CBN has since begun reticulating the new naira notes to all its branches across the country.
Emefiele noted that in recent years, the CBN has recorded significantly higher rates of counterfeiting especially the N500 and N1,000 banknotes. While global best practice is for central banks to redesign, produce and circulate new local legal tender every five to eight years, existing naira notes have not been redesigned in the last 20 years.
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, 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.
However, the Director General, Centre for Promotion of Private Enterprises (CPPE), Dr Muda Yusuf described the planned currency redesign as a rude shock as there are more important issues bugging the economy. He noted that recently, Nigeria was downgraded by Moody’s from B2-B3 on account of a messy and weak financial system locally and internationally.
“We also know there are issues around foreign exchange. We know what is happening to the manufacturers, investors and foreign airlines. There is also the issue of high inflation that imposes huge cost on the economy and all that?
“How can you navigate the complex rural areas? That’s an issue around connectivity. What of areas without banks?
Nigeria’s first professor of the capital markets, Prof Uche Uwaleke, told Daily Sun that the decision to replace some naira denominations with new ones will be positive for the economy in the medium to long term.
“Although the measure does not amount to demonetization 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.
I expect that the Financial Intelligence Unit will be on the watch out for huge deposits as a way of monitoring illegitimate transactions”, he said.